A new survey by
During a recent webinar, addressing how best to create value through carve-outs, a third (33%) of industry professionals said they intended to start looking for acquisition opportunities while 11% planned on initiating a strategic review of potential carve-out opportunities.
A record level of dry powder in the market is a driving factor in the expected rise in carve-outs. M&A is also likely to play a big role in the restructuring of companies that have taken a financial hit as a result of COVID-19, as an increasing number of firms will look to offload business units to generate cash.
However, the survey reveals the added complexities of executing cross-border carve-outs in the face of a global pandemic. When asked to identify which areas would require the most attention in carve-out due diligence, over two fifths (43%) cited the challenge of identifying and mitigating risks. This was followed by the ability of existing management to execute value creation strategies (29%) and growth potential modelling (29%).
When it comes to preparing for completion, half of respondents (50%) cited the difficulty in ensuring that operating and financial models are ready from day one. This was followed by the challenges of negotiating transitional services and issues with the seller (25%) and ensuring the compliance of local legal, accounting and tax regulations (25%).
Marco Houscheid, Partner at PwC said: "While COVID-19 has led to a significant drop in M&A activity and an increase in business restructurings, we expect to see many opportunities for deals coming out of the crisis, as corporates will perform strategic reflections on their business portfolio and respond to shifts in their industries. As disposals and carve-outs will be back on the agenda, careful preparation, execution and implementation will be paramount to deliver a successful and value-maximising transaction."
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Footnotes
1. Survey conducted among 87 private equity professionals during the Intertrust Carve-out webinar on
Originally published
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