Carveouts: Closing of a Successful Deal

Our weekly newsletter is published to share updates and insights from our team of Private Equity and M&A legal talent . This edition is edited by Rachel Pugliese .

Carveout deals are on the rise and recently accounted for 15.5% of middle-market buyout deals, up from recent years.

A carveout deal is a carve-out, sale, or divestiture of a specific or separate segment, business unit, or a set of assets from a parent company to a buyer. It's become a popular tool in dealmaking due to:

• Higher borrowing costs making it harder to complete full leveraged buyouts
• Companies needing to raise cash and maximize shareholder returns
• Organizations sharpening their business focus and enhancing their enterprise value, which often means selling less profitable business units and attempting to raise capital from a unit not in the future business plan
• If a particular area of the business has achieved its potential and requires significant investment for the next business cycle, it may be time to carve it out to focus on the core business.

When helping our clients plan for the closing of a successful carveout deal, planning ahead is key.

The parties need to plan ahead to determine how best to smoothly separate the business operations of the carveout unit from its parent company to buyer without disrupting business activities, which often includes negotiating a detailed transition services agreement, which allows seller to continue to operate portions of the business that cannot easily and quickly be transferred to buyer at closing.

Insights

Navigating ILPA’s NAV-Based Facility Guidance

The Institutional Limited Partners Association (ILPA) recently released guidance regarding the use of the burgeoning suite of private capital fund liquidity/portfolio management tools known as NAV facilities, a product that is expected to grow to $600 billion this decade.

ILPA’s guidance provides a history of NAV-based facilities, a collection of LP concerns regarding their use and transparency, recommendations for GPs on engaging their LP base, proposed legal language, and additional recommendations regarding disclosures.

The past several years have presented significant shifts in LP/GP relationship dynamics, and as fund terms and GP tools become ever more complex, ILPA encourages LPs to bring a united front to the negotiating table.

NFL Commissioner seeks possible August 27 special meeting on private equity

The NFL Commissioner has asked the 32 owners to set aside time for a potential league meeting on the long-expected rule to allow teams to sell a portion of the franchise to private-equity funds. It’s expected that teams would be allowed to sell up to 10 percent to a private-equity fund.

Global M&A by the Numbers: Q2 2024

Second quarter M&A were flat compared to first quarter’s levels, both in volume (with $552B transacted in Q2 against $555B in Q1) and in the number of deals (8,551 transactions, just 0.1% short of Q1).

Nonetheless, the quarter saw a rise in transactions taking companies private, more than at any time in the last two years. The second quarter saw $67B transacted across 32 deals for this deal type, including 13 deals over $1B.

Upcoming Events

Private Equity and M&A Trends and Opportunities for the Rest of 2024

• Thursday, September 26, 20247:30-10:30 am Eastern
• Nixon Peabody's Boston Office

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This newsletter is intended as an information source for clients and friends of Nixon Peabody LLP. The content should not be construed as legal advice, and readers should not act upon information in this publication without professional counsel. This material may be considered advertising under certain rules of professional conduct. Copyright ? 2024 Nixon Peabody LLP. All rights reserved.