When engaging in either a sell or buy-side corporate restructuring, one necessary topic to explore is how existing relationships can benefit the transaction.
Utilities Providers:
- Purchasers can leverage existing contracts to justify offer price, just as a seller can use them to justify listing price.
§ The buyer can use these contracts if they’re lucrative, or if they’re not can use them to devalue the overall cost unless amended.
§ Make sure you look into whether contracts are transferable or not, and when their term expires.
Vendors: (Consumables, Raw Materials, Logistics, etc)
- Divesting company can make introductions and can help negotiate new contracts, or honor old ones.
- There may be some intricacies pertaining to contracts whether the new company is retaining the name/title or if they’re changing to a different company altogether.
Existing Customer Base:
- If the divesting company is getting out of the specific process, they can transfer the current customer base over by making introductions.
- The divesting company can increase value by showing projected revenues, or helping secure LOIs. This is especially easy in a management buy-out or spin-off scenario.
If you’re currently engaged in, or planning to begin, a carve out or acquisition, please reach out to us. We’ll be glad to let you know how FabExchange can either increase your ROI in a divestment or ensure you get the most out of the next business unit you acquire.
Dmitrius Garcia d.garcia@fabexchange.com & Shaun Flynn shaun.flynn@fabexchange.com
