The situation
A newly formed carve-out in the healthcare sector, backed by a top five global private equity sponsor, faced the classic carve-out problem: less buying scale than the parent it came out of, fragmented vendor relationships, and a rapid deadline.
Vendors were positioning aggressively. They knew the new company had less buying scale than its former parent, and that its IT contracts had to be in place for the business to run on its own.
What we found
A carve-out goes into these negotiations with less scale than its former parent, a short timeline and no purchasing history of its own, and vendors price against that perceived limited leverage. We flipped that: on every contract, Deal IQ engaged a subject matter expert who had sold that product, so each negotiation ran against a specific read of where that vendor had flexibility rather than against the client's weaker position.
There was a date by which everything had to be signed. Every contract closed in under three days, at an average of 36% below the vendors' last position.
The result
- Average reduction
- 36%
- Time per contract
- Under three days
- Largest single saving
- $9.5M, Oracle
- Total savings
- $14.5M
Vendors included Oracle, IBM, Axway and VMware.
Takeaways
- 36% average reduction against the vendors' last position
- Every contract closed in under three days
- Carve-out pricing reflects the vendor's position, not the cost of serving the business
Frequently asked questions
Does a carve-out have to accept worse pricing than its former parent?
No. Reduced scale is real, but carve-out pricing is generally a vendor posture rather than a reflection of cost to serve.
How fast can contracts move during a carve-out?
Every contract in this engagement closed in under three days. The carve-out date is a constraint we are used to working around.
Can this run alongside the carve-out work already underway?
Yes. The client sends Deal IQ the latest vendor proposal and the deadline. The negotiation runs in parallel with everything else a carve-out requires.
DEAL IQ IN NUMBERS