96% of the German executives surveyed as part of the AlixPartners Disruption Index 2022 say their business models must change within the next 3 years, 60% already observe a transformation or expect it to happen within one year1.
This expectation is driven in particular by developments such as further accelerated technological change, breaks and disruptions of supply chains, fragile economic growth with rising inflation rates, and new ESG regulations. The war in Ukraine is a further external shock to which companies need to respond to in the short term, and we can expect additional disruptions in the coming years.
To effectively respond to strong disruptive forces, organizations must continually adapt to changing circumstances, prioritize activities and bundle resources. The results of these adjustment processes can be changes in organizational structures, but in many cases a comprehensive transformation of existing business models will have to be implemented.
1. Carve-out as one possible response to disruptive changes
Far-reaching options for action are needed for business divisions severely affected by disruption – in extreme cases this disruption will result in the dissolution of the existing business model.
One possible reaction to disruptive changes can be the spin-off and subsequent sale of an affected business unit, or the collaboration with a joint venture partner. In extreme cases, a wind-down or sunsetting via a structured value-optimizing ramp-down might be the only viable solution to appropriately react to the situation. Indeed, 76% of the German respondents to AlixPartners’ recently released Turnaround and Transformation Survey believe that M&A transactions related to distressed assets will increase2.

Fig. 1 • Believe that M&A transactions related to distressed assets will increase
Source: AlixPartners illustration

Fig. 2 • The number of Merger & Acquisitions transactions related to distressed assets will:
Source: AlixPartners illustration
Since affected businesses are usually heavily interlinked with other divisions, a separation by means of an operational and financial carve-out is usually required. A separation should also be carried out to protect the “healthy” assets of a company from deteriorating values resulting from disruptions in other areas (so-called “ring-fencing”).
2. Critical success factors for a carve-out in a disruptive environment
Every carve-out project has its own rules and particularities which need to be considered during implementation. However, there are certain playbooks that can be applied – slightly adapted for each project – to facilitate the implementation. Careful planning and the strict implementation of defined goals are essential for a successful realization of a carve-out project.
The definition of a clear target, i.e. the strategic, operational and financial goals of the envisaged carve-out, is of crucial importance if working under disruptive conditions. Only with a clearly defined target all parameters and options can be properly evaluated, and decisions made at all times during the execution phase.
In a disruptive environment, the preparation and implementation of a carve-out means, above all, “working under uncertainty” – and in most cases very tight schedules need to be met. As a result, strict adherence to standardized project manuals is rather detrimental, as planning parameters and risk profiles under which the carve-out is designed and implemented are subject to constant change.
The following five key success factors are crucial for the implementation of a carve-out in a disruptive environment:
2.1 Clear definition of the carve-out scope and evaluation of all implications
• A comprehensive clarification of the carve-out scope is crucial for ring-fencing healthy assets.
• To clearly define the scope, affected assets and liabilities must be identified at an early stage and solutions for so-called hybrid locations must be developed (locations that comprise several different business units – their operational separation from one another is usually very complex).
• After clarifying the allocation of the assets, a detailed target structure needs to be developed, reflecting the effects of a new organizational and legal set-up. This approach prevents time-consuming changes at a later stage.