Selling of Company Parts

Introduction toFramework Carve Out

Carve out

Content

Lucentis Consulting Our approach Hard stuff – general approach

Our approach

Our approach

Carve Outs are about business and financials … but not only that…

We approach Carve Outs not only via thehard stuff:

Focus on PeopleFocus on EngagementFocus on Communication

Focus

Focus on PeoplePeople do the workPeople are the voice and representatives of the companyPeople make the differenceEmployees need respect & recognitionEmployees are valuable

Focus

Focus on EngagementManagement lead by example (certainly in times of tension, change …)Management inspire employeesEngagement will lead to trustTrust is the foundation for teamworkTeamwork foresee in continuityEmployees will be engaged when thereis trust, results in cooperation and dedicationUtterly: To have a team that’s WILLINGto work WITH

Focus

Focus on CommunicationTransparant communication from top to bottom and up… Making clear agreements and goalsInform the target group on a regurarly basesTake time for an informal walk & talkCelebrate succesCommunication result in commitment

Hard Stuff – General approach

Overall Goals of Carve Out

Maintain, regain trust from stakeholders (employees, business partners, mgmt, customers, public)

Maintain, regain capacity to act (individually, as teams, as orginanisation)

Support Management leading in times of transition

Foster orientation in an ambiguous, threatening and therefore stressfull situation for the organisation

Foster a proactive spirit of optimism attitude in the relevant organisation

Change view on situation – to open perspective and opportunity mindset

Carve out the strengths of the to be sold company to be able to harvest and build on them inside the new company

Questions to manage a Carve Out

What are the major parameters and guidelines from the Selling Company for the divestment? Where do they come from?

What are the concrete specific, precise goals for the divestment beyond “achieving the greatest monetary value for the Selling Company”?

Who are the key-stakeholders, what are their main interests?

Who has set up the divestment time plan and based on what? What are the milestones in the process?

From the Selling Company’s management point of view, what’s possible/thinkable? What’s not?

How much involvement of /participation of /openess to the affected management/organisation is acceptable? If none, what speaks against partially involving?

What’s the magnitude of trust in the loyalty of affected managers? Why?

What are the greatest risks in the divestment process? What’s planned to prevent them from happening?

Stakeholders and Interests•Price/Max value for the business•Continuity of the sold business•How to keep employees in business and motivated•Reach an agreement with the buyer, and what’s acceptable for employee representatives•Keep the time of insecurity as short as possible

Selling Company- To be sold organisation- To be sold mangement

•Get the best package/result for the to be sold organisation•Balance the interest of remaining and leaving employees = Tension Field!!•Stay with the organisation – avoiding the unknown•Respect from the selling organisation•Clarity and transparancy during the sales process•Securing the health of the NewCO

Employee RepresentativesAffected Employees

•Gain maximum value for money•Understanding of the business•Reach maximum transparancy about the to be bought business•Strenghts/Weaknesses of the business•Strategic fit•Keep the time of insecurity as short as possible

Potential Buyers

Types of Carve Out

Stand-alone carve-outCarve-out object as a stand-alone organization without integration into the buyer

Merger carve-outThird party organization as buyer of the carve-out object

Joint venture carve-outFusion of two equipollent organizations to a new organization

Phases of Carve Out

Emotional journey

Personal/IndividualProcessing

Team/Organisational Processing / Sales

Prep

Buyer announcement

Prepare for buyer & integration

Day One – Legal Transfer

Time

Capa

city

to A

ct

Phase 1Pre-

announcement of selling intention

Phase 2Announcement of selling intention

Phase 3Buyer Search

Phase 4Buyer

annoucement

Phase 5Integration preparation

Phase 6Day One

Phases IT Carve Out

IT Carve Out Strategies

Retention: IT remains at the parent company

Transition: IT of the acquiring company is used

Greenfield: IT is built from scratch

Carve Outs

StrategySelling

organizationSubsidiary

Buying organization

Transition Data extraction

• Business & IT staff training

• Business process adjustments

• IT adjustments• Data import

New-build Data extraction

• Business & IT staff training

• Business process adjustments

• Data import

• Interface development

Retention Data access separation

• Interface development

• Interface development

Ideal IT cooperation model

IT elemens effected by carve out

Data ClassesData class Criticality criterion

Personal data

• Critical according to the organizations guidelines and/or data protection regulations of the governments

• Critical if data is kept in a personal data IT system (person’s name in conjunction with birth date, salary, biography, etc.)

• Not critical if data reveals general communication details (e.g., E-mail, addresses, company phone number, user identification)

Organizational data

• Critical if classified as being critical by at least one of the participants due to business interests

• Critical if data is considered confidenfial or secret• Critical if data is internal but business departments decide it has to be

accessed exclusively• Not critical if data is publicly available

Anti-trust data • Critical if data allows conclusions about non-public information of an organization's competitive behavior, business areas, internal details (e.g., purchase price, order quantity, delivery conditions, investments, research)

Third-party data• Critical if data has to be treated confidenlialy in regards of a third

party (e.g., supplier product design data, testing results, delivery reliability)

• Critical if data reveals information about the quality of third parties products and services (e.g., quality reports)

General workstream 1

General workstream 2

IT Workstream plan

IT Workstream

template application intakeName of the application

Frequency of use

User groups

Age of the application

Underlying and used technology

Input data from other systems used by the application

Application architecture (standalone or highly integrated)

Business relevance (business critical or business support for IPS)

Number of licenses

Application owner

Location where the application is used and hosted

Justification for application use (reason for keeping application alive at IPS)

Lessons Learned from IT Carve Outs

1. Build collaboration between the seller's carve-out team and the buyer's integration team

2. Allocate resources dynamically, leveraging external recources

3. Devote special attention to local differences

4. Design flexibility into Transitional Service Agreements

5. Establish a dedicated team to manage retention and support personnel transfers

6. Facilitate awareness of business dependencies on IT

7. Include IT leaders in strategic decision-making teams

8. Routinely review IT standardization and customization trade-offs

9. Maintain full and up-to-date documentation on the IT landscape

10. Include retention clauses in contracts for key IT personnel

Managing Carve-out Projects

Creating a Divestiture-ready IT Enviroment