Carve-Out support for Public Company Divestiture

A $1.6 billion publicly listed solar technology company engaged Virtas Partners for assistance as it prepared for the divestiture of a non-core division. The company needed Virtas to prepare carve-out financial information and a Quality of Earnings report.

​Client Background

The client had engaged an investment bank to sell a non-core business in its portfolio. The investment bank knew that in order to complete the sale at the desired date and for the desired price it would be critical to have transparency and comfort with the historical results of the business being carved-out and sold including ensuring that the historical results were prepared in a manner and detail consistent with the forward-looking business plan being presented. This historical financial information had not been prepared in the past. Virtas Partners was engaged to prepare the financial information and analysis required.

Scope of Services

  • Extracted financial data from client systems
  • Determined methodologies to be used for corporate allocations and commingled trial balance accounts
  • Prepared consolidated and consolidating carve-out financial statements
  • Prepared bridges to historical audited financial statements of the parent
  • Identification and quantification of Quality of Earnings adjustments to EBITDA
  • Supported the development of stand-alone cost estimates
  • Prepared a detailed carve-out data book and Quality of Earnings report
  • Supported the due diligence process dealing directly with the advisors (Big 4 Audit Firm) representing the potential acquirors.
  • Supported the negotiations with the ultimate Private Equity buyer as well as the separation/transition plan

Significant Milestones

  • Alignment and agreement with data extraction, allocation methodologies and basis of presentation in first week of engagement
  • Delivery of detailed carve-out databook including bridges to the audited parent financial statements and quality of earnings adjustments prior to deadline
  • Delivery of Quality of Earnings report prior to deadline
  • Completion of due diligence by the acquiror without findings negatively impacting purchase price from the carve-out financial statements and Quality of Earnings report

Value to Client

  • Preparation of historical financial information was critical to take the company to market and complete the divestiture; the company was incapable of preparing this information
  • Deliverables completed within the time and cost budget
  • Financial information that withstood due diligence from a Big 4 firm and supported the desired sales price of the parent