Full deal life cycle support enables PE firm’s carve-out transaction closure

Client background

The company is a young private equity firm with $7 billion in funds raised across two core focus areas. The firm invests in the technology and gaming sectors and operates with a lean staffing model for deal team and operating partner presence.

The business challenge

The firm needed support to manage and execute a carve-out transaction from a large publicly traded organization, as well as establish ongoing operations for the new company post-transaction.

The firm’s deal team was focused on assessing core products and market fit and needed support in performing due diligence over the target’s financials, cybersecurity/IT operations and tax impacts. In addition, they needed assistance assessing the ongoing operational needs of the organization; what will be coming with the transaction vs. where they needed to establish new operation and the strategy behind establishing those operations (e.g. hire/build or outsource).

The firm had very aggressive timelines, with a sign, close, fund and takeover all occurring on the same day. Baker Tilly worked with the firm to navigate tight deadlines and complex negotiations to ensure that they were informed for the decision on price, as well as operationally ready to operate the business post-transaction.

Strategy and solution

Baker Tilly played a comprehensive role in supporting this carve-out transaction, essentially acting as a “deal team as a service” function while also providing outsourcing support for critical business functions.

We began by identifying the scope of the acquisition and the assets involved to ensure all critical elements were considered. We supported the firm in understanding how to disentangle intermingled assets, identifying and standing up missing key back-office functions, defining and negotiating the transition services agreement (TSA) and identifying any potential risks that could delay or derail the function and transition.

Baker Tilly’s core services provided as part of this transaction/project included the following:

• Performed due diligence over financials, cybersecurity, core IT services/operations and software/technology stack
• Provided tax advisory services to advise on transaction type (asset vs. equity purchase) and tax implications initially and on a go forward basis
• Delivered project management and execution services to support the firm throughout the transaction life cycle
• Established a TSA between the new company and original owner
• Developed and managed a TSA management and exit plan for the 100-days following transaction
• Initiated open balance sheet, valuation and purchase price allocation work
• Supported establishing new company financial operations including accounts payable/receivable processes, management reporting, etc.
• Advised on short term and long-term operating strategy for the new company, including plans for accounting, payroll, HR/benefits administration and information technology (IT) services to support the investment thesis with minimal impacts on existing financial models
• Deployed Sage Intacct, a cloud-based enterprise resource planning (ERP) system, along with a comprehensive technology stack to establish a new accounting and finance infrastructure
• Created and outlined new accounting operational workflows to achieve financial reporting goals
• Engaged to provide outsourced accounting, HR/benefits administration and tax compliance services for the new company

This collaborative effort, with various Baker Tilly teams and external providers, ensured that all necessary functions were established and that the newly acquired entity could operate independently post-carveout.