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Case Study

Corporate Carve Out, NetSuite & BPO Implementation for Private Equity

Client Profile

Our New York-based client is a sports and active nutrition company that had been recently sold by a well-known, global corporation to a private equity firm specializing in the consumer, services, and industrial sectors. The newly independent business provided market-leading products in the $16 billion functional snacking industry, including popular protein powders and meal replacement and ready-to-eat protein bars.

Business Challenge

A costly Temporary Separation Agreement (TSA) of over $1M per month incentivized the private equity firm to complete the corporate carve out of its acquisition quickly. However, separating a new business from a larger entity is rife with complexity, and the client faced critical challenges that characterize most carve-out deals:

  • To stand up the new organization, the client needed to create new competencies for foundational operations like Finance & Accounting (F&A), IT, Sales & Marketing, and HR. These operations can’t be created in silos, with strategic decisions about everything from technology tools to onboarding new vendors to business operations requiring robust oversight and detailed knowledge of progress in other workstreams.
  • Most of the people, processes, and technology that previously ran the business were bundled into the legacy organization and were not moving to the new, standalone company.
  • Legacy processes couldn’t be replicated because they weren’t right-sized to meet the organization’s new scale. Major operational changes such as new systems and F&A outsourcing also required new SOPs (standard operating procedures) in every department.
  • The client’s business model was exceptionally complex; a successful transition to a new company hinged on maintaining a holistic view across a wealth of moving parts. For instance, the client manufactured and distributed products to many of the most complicated retailers, including Target, Walmart, and Costco. It also chose to focus on sales and sales execution as core competencies, outsourcing other business areas like supply chain and warehouse management to third-party providers.
  • The client aimed to implement a cloud-based NetSuite ERP system to simplify F&A activities and other operations like creating work and purchase orders. However, the complexity of its business model also made NetSuite implementation complex, requiring multiple integrations to enable data flow with customers, vendors, and other internal systems.
  • Collaborating with a large, bureaucratic selling corporation often triggers challenges and delays during a carve-out. For instance, the seller provided incomplete information during the IT discovery process.
  • Poor-quality data in the seller’s legacy systems caused additional headaches. For instance, vendor lists often lacked bank account information or included multiple options so it was unclear where payments should be sent. Legacy data also contained discontinued products, inactive customer addresses and vendors, and inconsistencies in the way fields were completed.

The client wanted a strategic partner with the expertise to manage the private equity carve out and properly stand up the new organization. Deep experience running a Separation Management Office (SMO) is critical for such projects, requiring a partner who can hold the overall roadmap that drives the business toward success, identify and mitigate risks, and ensure all workstreams remain aligned toward a common goal.

Exceptional partners offer the resources and expertise to plug operational gaps like F&A or IT as well, enabling the business to stand up quickly and efficiently. 

The client also required a partner with the flexibility to pivot as the new company’s senior leadership team was established, bringing new perspectives and deepened knowledge of the business weeds that led to some directional changes.

Solution & Approach

Auxis was hired to operate the Separation Management Office for the carve-out, bringing robust experience and a proven methodology for carving independent companies out of larger organizations. 

The client also addressed its F&A gaps by outsourcing back office Accounts Payable (AP), General Accounting, and Master Data operations to the Auxis Global Delivery Center in Costa Rica.

Auxis was hired to implement the NetSuite ERP system and all necessary integrations as well.

Finally, Auxis was hired to separate the client’s IT infrastructure from the selling corporation. That included migration of all related users and certain business applications to a new infrastructure environment, as well as implementing technologies and security protections that would enable the client to operate as a standalone organization. Click here to read that case study and learn more about challenges, solutions, and results of the IT separation project. 

1. Running the SMO.

Auxis managed 5 main SMO workstreams for the client:

  • Finance & Accounting
  • IT
  • Sales & Marketing
  • Supply Chain
  • HR