WE ARE THE EXPERTS IN HIGHLY SPECIALISED, HIGHLY DEMANDING, NICHE SOURCING TRANSFORMATION PROGRAMMES.
There are some Sourcing services, that in themselves require even more highly specialised experience and know-how. Programmes where there is no margin for error, where there is quite simply just a handful of Advisors (and even less firms) in the market that have the expertise and tools to successfully deliver them. These programmes include Captive Centre Sale and Joint Venture creation – programmes where having the support of a specialist Sourcing Advisory firm is not so much a nicety as it is a necessity.
Our Advisors have worked on some of the biggest and best-known Captive Centre sales and have experience in establishing and implementing Joint Ventures (JV’s) between Clients and Service Providers from small niche projects to billion-dollar programmes. We use our tools and expertise to focus on what matters and provide a clear path to achieving your objectives.
Captive Centre Sale
The key to the success of a Captive Centre sale is recognising that there are two sides to it – the Sale Transaction and as importantly the Outsource Agreement associated with it – combined they provide the total cost and benefit. In the apparent absence of specialist expertise, all too often M&A lawyers get involved, invariably focusing on the former (their comfort zone), and don’t recognise it is the associated Outsource Agreement that often dictates the success of a Captive sale (or otherwise). It is the Outsourcing Agreement that is typically more complex and more demanding to get right. We can help you get the most out of both aspects – the best price for your centre and the best Outsourcing deal. We will focus on delivering your business priorities and objectives.
The sale of Captive Centres, be they standard delivery centres or Shared Services operations, continues to be an increasing trend. The rationale is often similar to that of Outsourcing, essentially: ‘why should I invest in and run an operation that is effectively non-core and non-differentiating, that diverts leadership attention, and requires constant investment and improvement?’; ‘when by selling it to an organisation that specialises in these operations that will invest in it as their core business, and underwrite service performance and cost reduction, I can realise increased benefits.’ And ‘by ‘monetising’ the operation, receiving a cash consideration upfront, the transaction will provide both an improvement in both the P&L account and the balance sheet.’ As some may say ‘result’.
It is a big decision, and there are many things to consider in deciding whether it is the right decision for your organisation. There are equally 4 different approaches to running such a process each with their merits/weaknesses – the right approach will typically be driven by your key objectives.
We are often asked ‘Is there a market for such transactions today?’ And the answer is unequivocally ‘yes’. Indeed for right operation it has arguably never been more buoyant from the perspective of Service Providers competing to buy such operations. There is a clutch of large Outsourcing Service Providers that have strategically made the decision to actively look for such acquisitions and in many cases are sitting on a ‘cash-pile’ such that they can make it happen – quickly.
The key to maximising the value of your Captive Centre sale is to make it as attractive as possible to the bidders – to tick all the boxes in terms of what an Outsourcing Service Provider is looking for – you are ‘selling’ them the vision of what it can be to them.
Let us help you consider whether the Captive Centre sale is the right option for you, and if it is, then let us help you get the most from the transaction. – Talk to us.
Joint Venture Creation
A Joint Venture (JV), whereby two or more parties come together to create a new enterprise, is effectively a commercial model that can be applied to a range of different Sourcing models. The reasons for developing a JV can vary significantly and include: developing a market utility model, combining a capability to develop a new market proposition, bring together complimentary expertise, for regulatory approval reasons (leveraging one entity’s certification), or for tax reasons.
A Joint Venture can absolutely be the right solution, in the right circumstances but all too often JVs are pedalled as the solution for the wrong reasons. This may be by a company manager concerned by a potential Outsource or sale, as being the best way to retain operational control – this is rarely a good reason to do a Joint Venture, not least as there are alternative and better ways of maintaining and achieving such control.
A Joint Venture should never be considered a permanent structure, it should be in place for as long as it meets the stakeholders’ objectives, but the array of potential exit options should always be considered upfront and facilitated by the agreements put in place.
The market has seen many Joint Ventures dissolved as their goal has been achieved, but equally the market is littered with failed Joint Ventures usually because they have not achieved their goal, the basis on which they were conceived has changed, or more often the business agendas and objectives of the parties involved have diverged over time such that the JV no longer meets the requirements of one or more of the parties.
The key to building a successful Joint Venture is ensuring that all parties going into the agreement go in with their eyes wide open, understanding the rationale and motivation for each party, and aligning the goals and objectives to ensure the JV drives the right behaviour in all stakeholders.
Negotiating and developing a Joint Venture is typically more complicated than that of even the most complicated of Outsourcing agreements. There are fundamentally 3 key contractual agreements required to establish a Joint Venture but depending on the complexity of what is proposed it may require multiple commercial and legal agreements – one notable example required 28 separate legal documents to be executed in which to fully establish the Joint Venture. This in itself should not preclude the creation of Joint Ventures, but the effort required and the need for specialist expertise should always be properly factored into any plans.
Our Advisors have considerable experience and knowledge in building successful Joint Venture (JV) organisations. Let us help you make yours a success from the outset. – Talk to us.
