CFO Intelligence Magazine – Fall 2022
Chris Bartlett
Verizon, Corporate Development
While traditional acquisitions can be tricky for reasons most practitioners can appreciate — valuation, structuring, and post-close integration in particular — transactions such as corporate spinoffs and divestitures may be more complicated and time consuming for the parent organization, and for the business being separated.
Bartlett should know. He has been involved in several of Verizon’s most recent corporate transactions, including the company’s $6 billion-plus acquisition of Tracfone Wireless, the leading US operator in the value wireless segment, from America Movil, which closed in November 2021. He also worked on one of Verizon’s most significant corporate divestitures of late — the sale of Verizon Media, including the Yahoo and AOL advertising technology businesses, which was sold to Apollo Management in a deal that closed in September 2021 for approximately $5 billion.
CLINICAL SEPARATIONS
“Corporate divestitures can be more complicated than traditional acquisitions for many reasons, but principally because you’ve got to carefully ‘unplug’ a business both financially and operationally, and often the business has been heavily integrated into the parent’s operations,” Bartlett explains. “While the financial separation is often time-consuming, practitioners often overlook the operational elements of separating a large business from a people- and infrastructure- standpoint.”
One detailed exercise involves taking a scalpel to the financial statements. “One of the more time-consuming steps is preparing ‘carveout’ financial statements, designed to represent the divested business unencumbered from the parent,” he says. “This process can take six to nine months, and requires the help of outside accountants and, importantly, the time and focus of many people in the business who have ‘day jobs,’ which can create distraction.” Additionally, this process involves removing corporate and other allocations from the separated business’s financial statements, and requires a great deal of corporate focus on mitigating “stranded” and other costs that can create unanticipated “value leakage” post-close if not addressed.
In corporate divestitures, areas of operational and infrastructure integration are often overlooked and can be tricky and time-consuming to untangle. “We share buildings, human resources, IT systems and back-end infrastructure with the divested business,”