Pursuing a carve-out strategy with a practice within your business can be a successful way to work with investors to distribute equity and build the value of your carved-out business ahead of potential spinoff and acquisition. The challenge with a carve out is that, unlike with a traditional acquisition plan, the buyer is the one being approached in this scenario, either through a private agreement or IPO, to inject funds into a company ready to operate independently.
This means the buyer expects to be presented with a business ready to be assumed by a majority stakeholder, with financial and operational visibility into expenses, revenue, and profit. Communicating with the buyer about product, market, value, and held assets are all part of the conversation; at Velosio, we support companies ready to streamline their technology and data in preparation for a carve-out campaign.
Determining Which Carve Out Model Fits Your Organization and Goals
A carve-out can usually take anywhere from 6-12 months to complete and a company must determine which kind of carve-out strategy they will be pursuing. A lift and shift strategy is much easier and will take a lot of pressure off setting up new systems and procedures as it essentially intact. However, lift and shift is not always a fit and sometimes operating, systems, and process changes must be made. Often, technology can be one of the more challenging changes and can take longer than the desired time. Velosio approaches carve-out implementations with accelerators and consultants that understand the need for a fully functioning system in a short amount of time. This allows us to partner with the firms involved and reduce the time and complexity of standing up new technology platforms within the carve-out company.
Preparing your ERP for Carve-Out
Let the business case make itself with the right technology platform. Potential buyers want to know that the carve-out will be resilient through the process of divestiture, and quickly produce long-term equity growth and return. Your technology stack can make presenting your projected valuation a slam dunk.
With Microsoft Dynamics 365 and Velosio accelerators, companies have a rich, flexible platform to record, automate and customize their data tracking and business operations. Velosio has built custom modules for Dynamics 365 that provide better investor data, improve operations efficiency, and solve industry-specific pains. By taking a hub-and-spoke approach to ERP, your executive team can have an ERP stack that strategically positions your holdings for maximum carve-out value.
Maximizing Carve-out Value With Dynamics 365
Having a roadmap in place for implementation and determining crucial must have functionality vs. nice to have will help accelerate the implementation. Velosio has learned having core financials with accurate reporting is one of the most crucial functions to get up and running within a carve-out. Velosio uses Microsoft D365 ERP solutions to deliver a fully functioning system, leveraging best practices and reducing implementation time and cost. With Core financials in place, it allows the company to function and deliver accurate reporting and financial information, crucial for the company to operate.
In parallel to implementing the core financial component, it is best to look at the business operations and determine a roadmap for bringing these requirements into the ERP solution. While some of these may be crucial, operations can tend to be business specific and take longer to incorporate. Leveraging Microsoft D365 ERP solutions, and other components of the Microsoft ecosystem such as Power Platform, Velosio is able to identify, design and streamline the implementation of important operational processes and keep it all within one solution.
By connecting Teams, Sharepoint, and the rest of the Office 365 suite to your ERP, your people operations can be more effective, more accurate, and more human. Create clear lines and practices for company communication as a foundation for higher employee engagement, policy compliance, and stronger company culture.
Divestiture and acquisition are very different processes for the company being moved to a new majority stakeholder – in a divestiture context, the firm pursuing the sale can leverage its technology and operations prowess as an added value, and provide a more tantalizing offer with the prospect of an expedited handoff. With the right technology platforms, processes, and tools, a carve-out can be shopped to potential buyers as nearly turn-key, and presenting investors with data transparency.