How do you prepare for a carve-out or IS merger?

Podcast with Thierry Haro

Thierry Haro, a member of the Infortive Community, is a specialist in carve-outs and mergers & acquisitions (over 30 projects: due diligence, mergers, JVs, carve-outs) and SAP projects (for 25 years). He shares his carve-out experience with us.

Listen to this episode for a behind-the-scenes look at an IS carve-out before the TSA (transition service agreement, which sets out the terms under which the transferring company undertakes to provide IT services to the buyer, in order to guarantee business continuity during the empowerment phase) contract is signed.

Enjoy!

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What are the best practices of a Transition CIO when preparing for a carve-out?

A "carve-out" is the sale by a company or group of companies of a branch of activity. This "IT carve-out" is a key part of the overall transaction, which needs to be prepared.
When an entity is sold, it does not necessarily exist in the information system and legal sense of the term. It must therefore be disconnected, "diverted" from the seller's information systems.

This is where general management calls on the expertise of a Transition CIO. Thierry HARO explains:

"Once the strategic vision has been formalized, the key challenge will be to implement and execute this contract. At that point, everything will depend on the involvement of top management, and we'll have to push for arbitration at the highest level."

The corollary project of the carve-out will be integration: the period during which these new entities are integrated into a roadmap. In terms of approach, the Transition Manager works on either the seller's or the buyer's side.

Feedback and best practices from a carve-out IT‍

"What's exciting about this kind of approach is that you're not just doing IT. There are legal issues, human resources issues and not just application mapping and knowing how to manage new interfaces."

You have to expect anything!

Returning to the key competencies of an interim manager in the context of a carve-out, Thierry Haro reminds us that, at such times, everything accelerates. You have to expect everything!

You have to produce results quickly

"It requires shaking things up over a three-month horizon. You're not doing a long-term story, you're expected to deliver quick results.

To be effective: a strategic plan and an action plan

An operation of this type always begins with a strategicplan, followed by an action plan. "The sooner the better", stresses Thierry Haro! "Ideally, the Transition Manager should have been briefed well in advance.

Everything moves very fast, so you have to be prepared

‍Theaverage duration of an assignment before signing can be quite rapid. After signing, an assignment can last from 12 to 18 months. If the seller hasn't prepared and trained beforehand, the risks are high. The organization has been sold, and in six months' time will find itself cut off from the parent company...It needs both to continue and to change its habits in order to have an autonomous information system.

"I've seen carve-outs take years! You'll only find a buyer if you're able to show it off. All this has to be prepared. You have to add value to the activity, make it more or less autonomous, and explain in the project documentation how you're going to achieve autonomy. An operation of this type always starts with strategic thinking".

Points to watch

Reassuring teams‍

Working under "NDA" is a major constraint. Indeed, the operation only becomes public once it has been signed.

"And once the deal has been signed, the key challenge is to reassure the teams. Some people will be offered the chance to follow and join the new group, or to stay on with the selling entity's projects. However, no one can guarantee the future in this kind of operation. You can't make commitments. An interim manager only commits himself!"

Check that the decision can be applied by all‍

One of the other points of vigilance in this type of mission is that sometimes the strategy can be decided at an international level and must be applied in France.

"When the decision has been taken in San Francisco and you end up with two small factories in France, and no attention has been paid to individual cases, the legal aspect has very often been overlooked, and the suspensive nature of the CSE's opinion is then discovered. You run the risk of a "délit d'entrave".

In conclusion, an Information System carve-out cannot be improvised. It requires confidential upstream preparation, and takes place over a short, constrained period of time, with the human, managerial, technical, legal, fiscal and social stakes very, very high! In view of the importance of the issues at stake, Thierry Haro reminds us that companies should not hesitate to call in specialists.