Carve-Outs
Sitting on a carve-out that has not been pressure-tested?
The TSA Pre-Signing Review surfaces the service catalog gaps, pricing risks and exit ramp constraints before they become Day One problems.
A carve-out is the separation of a business unit, division or subsidiary from a parent company into a standalone entity. It is the transaction structure that almost always produces a TSA on Day One, because the carved-out business rarely owns the systems, contracts and shared services it depends on to operate.
In a clean acquisition of an already standalone company, the target arrives with its own ERP, its own HR systems, its own contracts and its own infrastructure. In a carve-out, the target arrives with almost none of that. The general ledger lives in the seller's instance. The payroll runs through the seller's HRIS. The data center is the seller's data center. The procurement contracts are signed by the seller. On Day One, Newco needs all of those services to keep running, and the only way to get them is through a Transition Services Agreement that holds the seller responsible for continuing to provide them for an agreed period at an agreed price.
The carve-out structure is the reason TSAs exist as a discipline. The economic case for a carve-out, the deal model, the integration plan and the value creation plan all assume that the buyer can detach cleanly from the seller within a defined window. That window is the TSA term. Every dollar of stranded cost, every month of extension fee and every dispute about scope ultimately traces back to how the carve-out was structured at signing.
Carve-outs cluster in two flavors. The first is a strategic divestiture where a corporate parent sells a noncore unit to a private equity buyer, usually with a deep TSA and a complex separation. The second is a portfolio cleanup where the corporate parent IPOs or spins the unit, usually with a shorter TSA but tighter scrutiny from public market regulators. Both structures put the buyer or the new standalone entity in the same operational position on Day One. The work to exit the TSA is the same.
In deal documents, where the carve-out is defined as the perimeter of the business being sold. In TSA schedules, where the carved-out scope is enumerated service by service. In the value creation plan, where the carve-out timeline becomes the controlling constraint on Year One operating goals. In Day One readiness checklists, where every system the carve-out depends on is mapped to a TSA service line. In stranded cost analysis, where the carve-out structure determines which costs are recoverable and which are not.
Divestiture · Newco · Transition Services Agreement · Stranded Costs · Day One Readiness
The TSA Pre-Signing Review surfaces the service catalog gaps, pricing risks and exit ramp constraints before they become Day One problems.