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Optimizing private equity carve-outs for growth


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Private equity firms executing carve-outs in the middle market have the same primary objective as with all their portfolio companies: optimize exit price within a limited time frame. For carve-outs, that means breaking free of transition services agreements as quickly as possible to position the stand-alone company for long-term success.

This article discusses the three-phase approach private equity firms should take to execute carve-outs. Phase one begins early, before the letter of intent (LOI), and involves a quick, cost-efficient assessment to help gather more information that may impact deal terms. Phase two uses an industry template to get off the transition services agreement, while ensuring the company can continue running. Phase 3 starts post-transition services agreements, and includes customizing systems and implementing processes for long-term success.


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