Carve-out transactions present unique opportunities for established businesses looking to streamline their operations and to raise capital through the monetization of non-core assets, but also present unique challenges that call for specialized professional advice and careful planning.
What is a Carve-out Transaction?
A "carve-out" transaction usually involves the sale of a specific business line, unit or division. These transactions can take many different forms, from divestitures of entire business segments to sales of single brands, but the defining feature of a carve-out transaction is that the assets to be sold are at least partially integrated into the operational structure of the seller and its related entities (and thus need to be "carved-out").
Current market conditions are leading many companies to take a hard look at their business and adjust their strategic focus or seek new capital to adapt to our new realities. Further, with private equity "dry powder" rising to record levels and extremely low interest rates, sellers looking to offload quality assets should find a receptive audience of both strategic and financial players. As such, we expect there will be many opportunities for carve-out transactions in the near to medium term.
The Importance of Careful Preparation
The sale process for a carve-out transaction is often strategically and legally complex. In our experience carve-out transactions require significantly more preparatory work and larger internal and external deal teams than customary M&A processes.
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Sophie Lamonde is a partner at Stikeman Elliott. She is also Head of the Montréal office’s Mergers & Acquisitions Group, as well as a member of the firm’s Partnership Board. Her practice is directed primarily to the areas of mergers & acquisitions and private equity, with a particular focus on cross-border transactions. Sophie’s extensive corporate law experience includes advising Canadian and international clients in acquisitions, divestitures, reorganizations and general commercial negotiations. In addition, Sophie’s stand-out private equity and cross-border expertise is recognized by the legal industry’s most reliable and trusted directories, including Chambers Canada and the Canadian Legal Lexpert Directory.
Olivier Godbout is a partner in the Corporate Group at Stikeman Elliott. His practice focuses primarily in the areas of securities, corporate finance, domestic and cross-border public and private mergers and acquisitions, and governance matters. Olivier advises clients from a wide range of industries, including transportation, telecommunications and manufacturing. He also has experience working in Stikeman Elliott’s London office, where he acted for issuers and underwriters in corporate finance transactions, as well as for foreign companies involved in acquisitions in Canada.