Classroom training

Classroom Training -- Carve Out Course

In a carve-out transaction, the Acquirer faces the challenge of determining the value of a Target that is not yet operating as a stand-alone entity. All M&A deals have elements of risk. In a carve-out transaction, the risk increases because the historical operating results may not represent the operations going forward.

The purpose of our carve-out due diligence procedures is to ensure that all aspects of the continuing business are included in the Target’s reported financial results and to identify issues to be included in a transitional services agreement (if needed). Specifically, we analyze the Target’s historical operating results to determine if they are representative of the continuing stand-alone operating results.

The Web-based learning course that you completed discussed three important topics: why our due diligence is important to investors; typical carve-out due diligence procedures; and typical issues related to such transactions. In this coure, you will test your ability to identify carve-out transaction issues and develop pro forma stand-alone operating results.

At the end of this lesson, you will be able to:

• Determine the reliability and relevance of the Target’s historical operating results in carve-out transactions
• Evaluate the need for a transitional services agreement (TSA)
• Calculate pro forma stand-alone adjustments and understand how the adjustments may affect the Target’s purchase price

Materials For The Instructor

• Presentation Methods
• Case Study Work Groups
• Directed Discussion
• Questions and Answers
• Presentation Materials/Aids - Flip Charts (FC)
• Importance to Investors (prepared in advance)
• Due Diligence Carve-Out Challenges (prepare in advance)
• Typical Carve-Out Due Diligence Procedures (preprinted)
• Investor Concerns (prepared in advance)
• Transitional Services Agreement Issues (prepared in advance)
• Pro Forma Cash Flows (7 blank preprinted)

Participant Materials

• 1A Exercise 1: Project Leader Notes (from discussions with our client)
• 1B Exercise 2: Letter of Intent
• 1C Information Memorandum Excerpts
• 2A Exercise 2: Corporate Allocations
• 3A Exercise 3A: Information Technology
• 3B Exercise 3B: Plant Costs
• 3C Exercise 3C: Employee Benefits

Handouts

• 3A Exercise 3A: Additional Information—Information Technology
• 3B Exercise 3B: Additional Information--Plant Costs
• 3C Exercise 3C: Additional Information--Employee Benefits