Supporting multiple carve-outs from a PE-owned global aerospace and defence components business
Client Challenge
Our client, a global aerospace and defence components and systems manufacturer, was acquired via a public-to-private transaction.
Following the acquisition, the buyer quickly began to restructure the group in line with its strategy to maximise the value through a ‘sum of the parts’ approach.
The majority of group-provided services were pushed down to reporting units – equivalent to £80m of historical annual cost. The intention was to make reporting units more independent in advance of likely sales, but the change represented a fundamental change in the operating model over a short period of time. This was further complicated by the reliance on legacy technology platforms which were not easily separated.
Additionally, there were a number of shared sites occupied by multiple business units which had to be physically separated between multiple legal entities.
Our Approach
KPMG was initially employed by the portfolio company itself, rather than the buyer, but we worked primarily with the PE deal team and their other advisors, as well as the vendor’s central function leadership, and management teams from the various carve-outs.
We supported key activities from inception to completion including: options analysis, standalone costs analysis, separation management (design, planning, and execution), Day 1 readiness (including transitional agreements).
We deployed a broad team of sector experts from within our Deal Execution team, alongside technology specialists to support management’s development of the “to be” operating model.
We supported management in identifying the people and non-people standalone cost adjustments, both for trade and financial sponsor scenarios. Additionally, we drew on previous experience supporting the buyer with previous disposals.
Our support took a variety of forms, from vendor assist, through to vendor due diligence and pre-sale diligence, dependent on the scale and complexity of the carve-out.
Benefits for client
We successfully positioned the sale of the carved-out businesses to a mix of trade and financial buyers in accelerated timelines.
The disposals saw our client receive proceeds of sales close to their original take-private investment.
The benefits have not only been financial, but have also been completed in short periods of time with limited requirement for the vendor to provide transitional support to the divested businesses.
Our experience of previous divestments and our knowledge of the vendor’s business enabled us to quickly increase our support and conclude our work more efficiently, and we were able to quickly identify and mitigate the more complex areas of separation.
Our work on the client’s various disposals supported the buyer’s initial deal thesis and subsequent successful offer to acquire an electronics company. This is likely to be combined with the acquired business to create a leading major player in the aerospace and defence sector, leading to significant further opportunity for KPMG support.
