Category Archives: Innovation

Technology has evolved, why hasn’t your carve-out strategy?

Successfully navigating a complex transformational project like a carve-out requires an effort in coordination. Synergies are analyzed, and months are spent negotiating the terms of the sale: assets, physical locations, employees among others. The new company must appoint executives and stand up multiple departments to support the primary operations of the business such as legal, finance, HR, and IT. Adding to this complexity is the IT separation and migration necessary for a new standalone entity to function. Few things are more counter-productive to a carve-out than unnecessary meetings preventing the actual work from beginning. Unfortunately, there is rarely a straightforward approach to a large-scale technology carve-out; many applications are comingled which makes planning for separation difficult and stressful. Few internal employees also have the comprehensive view necessary to execute a successful IT carve-out from both Parent and NewCo lenses. Past IT carve-out projects required large teams of resources, and consequently meetings, between Parent, NewCo, and third-party consultants to determine the carve-out strategy: Identifying NewCo’s in-scope data and applications, negotiating licensing, sequencing resources and project activities, determining the future-state IT landscape, selecting a hosting strategy, etc.

Parent stakeholders are concerned with data security, proprietary information and the amount of work their resources have to perform to assist NewCo in separation. NewCo resources approach carve-outs with a lot of uncertainty, questions, and siloed knowledge. Third-party consultants bring a large team of broad specialists and work to piece together information from Parent and NewCo for a successful project to ensue. This siloed approach made technology carve-outs risky; with many projects becoming delayed and going over allocated budgets.

The IT component of a carve-out is often over-complicated when it doesn’t have to be. By utilizing an agile approach built on technology, productivity can be increased without locking up stakeholders in unnecessary meetings. Fission Consulting has developed technology accelerators specifically for large-scale divestitures to obtain a 360-degree view of Parent’s IT landscape and identify all in-scope data for the carve-out. With the time saved by utilizing a technology-centric methodology, Fission can incorporate additional rounds of data migration and testing into the project plan to deliver a properly functioning IT landscape to NewCo upon exit from the TSA.

We start by running a scan of Parent’s database to generate the list of relevant NewCo data for the carve-out according to the terms of the sale. Using technology in place of people to identify carve-out criteria eliminates uncertainty and allows services to be fixed fee in pricing. With less boots on the ground and over 50% of the work by Fission consultants taking place remotely, Parent and NewCo resources can focus on the other pressing decisions that are necessary for separation. Existing rulesets from previous projects are leveraged for a straightforward approach to standard data migration. Custom data is then further examined to determine necessary transformation rules.

Once the carve-out criteria is finalized, mock data migrations to NewCo’s landscape are conducted to refine the in-scope ruleset and identify system errors. Automated data validation checks have been developed to gauge the success of data migration as well as quickly fix carve-out logic for the next iteration of testing. By repeating this “test and refine” approach, the end result is a NewCo IT environment that is free of Parent data and is ready to operate upon day one of separation. For more information on how Fission can assist during your next carve-out transaction, contact Brandon Lage at blage@fissionconsulting.com.

Conclusion

Fission Carve-Out Services were built and refined specifically for carve-outs and have been utilized successfully in multiple large-scale system transformation projects. Fission’s team of carve-out specialists can advise private equity clients in the pre-close diligence phase to provide expertise in the activities needed for IT separation. By informing the carve-out strategy with diligence findings, an accelerated approach to carve-outs is enabled to make IT separation a non-event for all stakeholders and accomplish a quick exit from the TSA on time and under budget.

About Fission

Fission assists buy-side and sell-side clients with TSA negotiations, IT carve-out planning and execution, and post-separation optimization. Please reach out to us with comments or questions at learn@fissionconsulting.com.

Preparing for an IT carve-out?

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Preparing for an IT carve-out?

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