Carve out – What is special about the SAP Carve out.
Day One Readiness always in view.
Carve-out or merger with SAP background: The purchase or sale of companies or parts of companies requires the separation of the SAP/ERP system landscape or entire IT architectures in addition to many contractual and organizational activities on the buyer and seller side. The top priority is to ensure the uninterrupted continuity of the operational business on the buyer side (Day One Readiness). GAMBIT Consulting GmbH masters all forms of IT and SAP carve-outs with its practice-proven process models and tools. From the simple separation of already isolated company units from running SAP systems to the most complex separation projects of organizational and IT-technically networked parts of operations with global companies and groups – with us you are in safe hands.
What makes an IT carve-out so difficult?
Today, almost all parts of a company are interwoven both organizationally and financially. This connection also applies to the IT systems and the associated business data and processes. If a part of the company is now to be spun off, numerous difficulties will arise, especially in the area of IT:
- Identification of the data to be transferred to the buyer’s systems
- Clear separation between data that may be transferred and data that cannot leave the selling company under any circumstances for compliance reasons
- Data protection during carve-out
- Avoidance of impairments of the SAP systems during the carve-out (interruptions can cost expensive
- Risks for the continuation on Day 1
- Selection of the correct method for data migration (copy, restart)
- Often a narrow time window of only a few months
- Trouble-free integration of processes into the IT structure of the buyer or subsidiary (carve-in, post-merger integration)
- Development of a new IT organization for spin-offs
- Creation of technical prerequisites for organisational and operational synergies
The special challenge in IT carve-out is to migrate a dependent unit from one company to another within a tight time frame and while maintaining the functionality of all systems. This requires a sophisticated due diligence in conjunction with extensive system analyses in advance. After an in-depth analysis, we can support both buyers and sellers with many years of experience and tailor-made tools in the migration and integration of business units from and into running SAP systems.
The experts of GAMBIT are at your side with words and deeds, so that no nasty surprises wait for you on Day 1 after the conclusion. After the integration, we also ensure the stabilization of all processes and the optimization of the systems through appropriate TSA in order to make the best possible use of synergies.
SAP Carve-out – Early detection and selection of the appropriate scenario is crucial.
The essence of 20 years of IT experience.
From the essence of many SAP carve-out projects, we have developed a guideline with which we can quickly and efficiently analyze the customer-specific initial situation and objectives and derive the possible options for action.
With the help of our standardized system and process analyses, even with the most complex system architectures, possible obstacles can already be identified in the planning phase and ways to clean up or minimise risks can be pointed out. After common identification and selection of the suitable carve-out scenario, the project scope, the periods, milestones and target dates as well as the transformation tools to be used are coordinated and installed.
How does an SAP carve-out work?
As part of our end-to-end service, we offer you support from planning through due diligence and carve-out to carve-in (post-merger integration). But how does the process begin?
1. Examination of the buyer’s IT
Whether a spin-off, spin-off, divestment or integration of new subsidiaries – before an IT carve-out, we always thoroughly examine the possibilities with the buyer. The following questions are in the foreground:
- Does the buyer’s IT with its corporate structure have the necessary capacity for the integration of an external system or are investments necessary for extensions and changes?
- Are the buyer’s IT and the processes in the parts of the company to be sold technologically compatible?
- Are standard software used on both sides or are they highly individual solutions that require adaptation?
With the data from the short analysis of the buyer’s IT, the IT carve-out can be planned much more purposefully.
2. Planning and implementation
The planning of the carve-out affects very different areas:
- Support and consulting during contract negotiations from an IT perspective (avoidance of risk discounts by timely elimination of weak points on the seller side)
- Analysis of the seller’s data and IT systems (Which IT systems are important for the transaction object? How can smooth integration on the basis of this information be ensured?
- Development of an integration roadmap
- Design of TSA (Transition Service Agreements) for planning the DAY 1 Readiness
- Timely conversion of the surrounding systems
- Definition of business processes for Day 1 in the system of the new company
- Definition and comparison of individual scenarios for data separation and the use of applications → Selection of the selected scenario
- Project management to avoid business interruptions on Day 1 and beyond
3. IT-CARVE-in (Post Merger Integration)
The final task for the buyer is to realize the IT synergies and to enable the organizational and operational synergies through appropriate technical prerequisites. This requires various steps:
- Stabilization of all processes, so that everything runs smoothly even after Day 1. Possible sources of error are identified and eliminated accordingly.
- Optimization of the systems so that the complete synergy potential can also be developed after the transaction.
- If required, support in restructuring or redeveloping the IT organization.
Last but not least, we are making preparations for our exit after the carve-out process and carve-in have been completed and the integrated business unit is functioning smoothly in the corporate or group structure.
Merger or carve-out with SAP, Asset or Share Deal
retroactively or forward:
Our process models cover all variants!
Our clients for the planning and implementation of carve-out-related SAP system separations are both sellers and buyers. A sales-side integration often takes place long before the sale of a business unit becomes officially known. GAMBIT cooperates in projects of this kind with leading global providers of transaction advisory services. Well-prepared carve-outs also reduce potential risk discounts on the purchase price by the buyer.
On the buyer side, SAP carve-out projects are usually commissioned between signing and closing or after closing. These companies are often under time pressure and include not only the technical planning and implementation of the carve-out but also the coordination of necessary IT activities between seller and buyer. We are also responsible for planning and supporting the transformation of entire system architectures that are to be integrated into the buyer’s infrastructure environment.
Carve-Out – why IT plays the decisive role
Whether large companies with a complicated group structure or medium-sized companies – almost all companies today work data driven and rely on powerful IT systems. Complicated company structures would not be manageable today without appropriate SAP/ERP systems and a powerful data center. Because IT is so important today, it can unfortunately quickly become a deal breaker in carve-out transactions. Of course, the products and markets of the buyer and the transaction object also play an important role. Nevertheless, IT problems at all levels can lead to very expensive consequences:
- Before the transaction: If the seller’s carve-out is poorly prepared, this can lead to significant risk discounts during price negotiations. The seller takes certain hurdles and challenges into account and is therefore only prepared to pay a lower price. However, if there is no comprehensive planning on the buyer side, this can lead to the difficulties described below during and after the transaction.
- During the transaction: In the worst case, it comes to a standstill, resulting in expensive delivery interruptions. No business model works if IT hinders communication opportunities with suppliers and customers or automated processes. Under normal circumstances, this may also require extra investments that significantly increase the cost of the acquisition and may make it unprofitable.
- After completion of the transaction: A non-targeted post-merger integration (PMI), on the other hand, can result in the targeted synergies not being exploited. For example, if certain technical requirements are not available, even the best planned optimization of the organizational structure cannot be implemented.
You want to avoid such problems? Our experts are at your disposal throughout the entire process and ensure that carve-out and carve-in transactions run smoothly and purposefully.
Which carve-out methods are available for data separation and integration?
The exact technical process of carve-out can take place in different ways. This always raises the question of how the necessary data can be migrated from the seller to the buyer. There are various approaches to this question:
1. The Greenfield approach
The greenfield approach is used very often. For this purpose, a completely new SAP ERP will be installed at the new company (the buyer) (on a greenfield site = greenfield). In addition, all important processes are set up before the seller’s data is migrated into the new system.
Procedure: New installation at the buyer’s site → All processes set up → Data migration
2. The brownfield approach
For this approach, a complete one-to-one copy of the seller system is created and made available to the buyer. After the migration, all important data on business data or organizational units of the selling company is removed. Due to the transfer of confidential data, this is only possible for spin-offs to subsidiaries.
Procedure: 1:1 copy of the existing system is provided → Removal of all sensitive data from the system
In practice, the greenfield approach is very often used, while the brownfield approach is only suitable for merger carve-outs. It may also be possible to create the data export as a client in the SAP ERP system of the parent company and make all changes there.
GAMBIT, an excellent partner
for transformation and SAP Services!!
In addition to carve-out scenarios, our comprehensive range of transformation services also covers the following areas:
We also offer various basic SAP services, from SAP implementation and strategic SAP consulting to SAP application management.
Experienced specialists are available!
Glossary of SAP Carve Out
- Equity carve-out
The equity carve-out is a process in which a group sells shares in a subsidiary on the stock exchange. As a result of this sale, the Group reduces its shares, but as a rule retains a majority interest. This sale is often referred to as a spin-out.
A spin-off is similar to an equity carve-out, but the shares of the subsidiary will be issued to the existing shareholders free of charge. To this end, the Group places all shares on the stock exchange as part of the IPO of the subsidiary. The advantage is that the parent company retains entrepreneurial control while still being able to invest all its capital in the core of its own business model. A spin-off is sometimes also referred to as a spin-off, as the subsidiary thus automatically carries out an IPO. Such spin-offs often involve a transfer of personnel, so that employees from the Group become the managing directors of the subsidiary.
A spin-off describes the formation of a subsidiary by spin-off from the respective parent company. This is the case, for example, when research and development creates new products that are to be tested in a subsidiary instead of an affiliated business unit. Particularly risky products as well as business areas or divisions can also be tried out as a subsidiary in the context of a spin-off from other units of the company.