M&A Integration, Creating Value from a “Carve-in” Transaction
Anatomy of a lesser known transaction type
Most people have heard of conventional M&A integration and Divestitures (be it carve-outs or spin-offs). However, the rare cases of carve-in transactions exist as well, albeit less prevalent than the former deal types. It does have its own triggers, rationale, transaction process, nuances and approach to integration which marginally differ from conventional M&A integration. Having had the good fortune of executing two of these during my career (both public companies), I thought I would share my thoughts on this topic.
So, what exactly is a carve-in?
A carve-in transaction refers to those deals when a parent wants to integrate or re-integrate a fully or partly owned subsidiary into itself driven by various triggers such as market pressures, a mega-transaction resulting to threaten the existence of the subsidiary due to conflicts resulting from the transactions, drastic changes in the channel structure or business model changes due to acquisition of a new technology which promises to extract higher value from the integrated operations than a standalone subsidiary.
Although several nuances of conventional M&A integration are still relevant, the focus with carve-in integrations are on a variety of different issues.
