A carve-out is the partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors. The carve-out, whether conducted through a trade sale, buyout, or IPO, has become very popular among M&A teams. In fact, carve-out deals boost balance sheets and deliver shareholder value. A carve-out allows a company to capitalize on a business segment that may not be part of its core operations.

But carve-outs are also the most complex type of divestiture and often resource-intensive and costly. They require lot of preparation, communication, and coordination across multiple teams and stakeholders. If the execution of the carve-out fails to deliver on the plan, business continuity and valuation are at risk quickly. Therefore, it is crucial to plan a carve-out project rigorously. Here is how.

1) Establish strategic goals and set up team

First, establish the strategic goals and objectives for the carve-out. The first step is to define the reasons for the carve-out as well as the desired outcomes. Desired outcomes may include reducing costs, divesting non-core assets from the business, increasing focus on core competencies, or simply improving financial performance. Many companies, such as Siemens, decided to carve out business units and list them on the stock market to achieve higher valuations and collect capital. Whatever your goals are, ensure that these goals are aligned with the overall business strategy of the company. As soon as you have your goals lined up, it is time to set up your team. Analyze your internal team for the necessary skills and competences and do not shy away from mandating external partners that can augment skill or capacity gaps in your team. This may involve engaging legal counsels, consultants, software providers and other external advisors.

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2) Conduct a comprehensive assessment of the business unit: Baselining

Perform a thorough analysis of the business unit to be carved out, including financial performance, organizational structure, key assets and liabilities, employees, contracts, IP and license, real estate, customer relationships, etc. The list is long and contains every aspect and dimension of the business unit in scope. Some carve-out projects easily contain 25 plus workstreams. Next, identify any operational or legal risks associated with the carve-out and develop mitigation strategies and put operational plans in place. Also, you want to determine the legal and regulatory requirements. Ensure that all legal and regulatory requirements are met, including obtaining any necessary approvals or licenses from regulatory bodies.

3) Develop an operational carve-out project plan

Create a detailed project plan that outlines the timeline, budget, resources, and deliverables of the carve-out. And develop a plan B and C in case things go wrong. Assign responsibilities to different teams and stakeholders, and establish clear communication channels to ensure that everyone is on the same page. Work with project management tools that allow you to dynamically change and assign action items and monitor the progress of your project team in real-time. Make sure you have full transparency about all dependencies between different workstreams and can anticipate different scenarios.

5) Plan IT carve-out, cut-off and technology transfer

One of the most complex aspects of any carve-out is the transfer of IT systems, tools and infrastructure. First, you need to ensure that all IT assets, tools and systems are identified (during the Baselining) and properly transferred. The carve-out of IT systems such as ERP systems needs to be well prepared, because those systems are the backbone of a company and host sensitive data that is needed to manage the company. Often the IT workstream is considered to be the most critical workstream during a carve-out project and often includes the critical path in a project.

6) Develop a change management concept and human resources plan

Develop a plan for managing the workforce before, during and after the carve-out. This may include transitioning employees to the acquiring company, offering severance packages, or retaining key employees. Identifying and understanding risks and chances that affect your workforce, can have huge implications to the success or failure of the carve-out project. Use digital tools and systems to collect, manage and analyze employee data and facilitate communication with employees. Remember: Every employee that is affected by a change has huge implications with regards to other workstreams such as finance, IT, legal, real estate, and others.

7) Monitor, control and report progress and adjust as necessary

Monitor the progress of the carve-out and set up a rigorous controlling. During a complex project like a carve-out project, a thousand things can go wrong. It will pay off if you have planned the carve-out project in a detailed and digital manner. This will allow you to control and report the progress for all workstreams and project team members daily. Do not shy away from adjusting the plan as necessary. Often, project teams find new information during the Baselining, which requires them to adjust the plan. Adjust the plan to ensure that the objectives are met. Prepare and send reports to all affected stakeholders, communication is key.


In conclusion, planning a carve-out requires a comprehensive and detailed approach. M&A managers and consultants must establish clear goals and objectives, conduct a thorough assessment (Baselining), develop a detailed operational carve-out plan, and communicate effectively with stakeholders. Digital tools and systems that are designed for M&A processes are crucial for project management, communication, and collaboration across teams, geographies and functions. By following these steps and leveraging digital tools, M&A managers and consultants can ensure a successful carve-out and meet requirements with regards to time and budget.

Michael Klawon

Michael Klawon

Scientific Practitioner and LMU x Breitenstein Consulting Project Participant

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M&A Platform