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Sell-Side: Another Transaction Highlights Extensive Carve-Out Qualifications

Deloitte Corporate Finance LLC

Abstract

A large Aerospace & Defense company with a long standing relationship with Deloitte was looking to divest a non-core wholly-owned subsidiary within the aviation industry. Deloitte was selected to provide transaction support to the parent company related to the divestiture. Deloitte Corporate Finance LLC* (DCF) assisted the client throughout the various phases of the sale mandate working closely with Deloitte & Touche LLP’s M&A Services practice (Deloitte & Touche) to complete the transaction.

Challenge

The carve-out involved a complex business model that had recently undergone significant restructuring and displayed a limited history of profitability. The subsidiary’s diverse contract base, each with a unique set of terms, presented a challenge in determining contract profitability.  The parent company’s desire to maintain the strict confidentiality of the deal limited both the potential buyers contacted as well as the marketing materials distributed throughout the process. Additionally, potential buyers expressed concerns surrounding a slowing economy, a tight credit market, and the subsidiary’s desire to enter into a capital intensive new supplier agreement prior to the transaction closing.

Approach

DCF and Deloitte & Touche worked cohesively with management and the parent company’s corporate development team to create an innovative approach to position the business model and investment opportunity. DCF helped identify a divestiture strategy, analyzed potential outcomes, and assisted management in preparation for buyer presentations. Deloitte & Touche assisted the client in their development of pro-forma financial information and performed seller due diligence including an analysis of the quality of earnings. After much preparation, a transaction was completed with a buyer that was identified by DCF.

Solution

Through a combination of our deep coverage of the Aerospace & Defense sector, experience in completing complex carve-outs, and a long track-record of teaming with other Deloitte subsidiaries, DCF was able to assist the client in creating an innovative investment thesis to approach buyers and ultimately complete a transaction in a complex market sector. This transaction exemplifies the possible benefits to the client that can be achieved by working with an organization that strives to seamlessly deliver a broad range of services to execute a transaction.

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