Carve-Out
A transaction where a division or business unit is separated from its parent company and sold or listed as a standalone entity.
Also known as: Divestiture, Spin-off, Demerger
One-line definition
A carve-out extracts a sub-set of a larger business and presents it as if it had always operated independently — which it usually hasn't.
Key TS challenges
- Carved-out entities rarely have standalone P&Ls; cost allocations must be rebuilt.
- Shared services (IT, HR, legal, finance) need to be separately costed.
- Stranded costs at the parent and separation costs at the NewCo must be quantified.
Output
Carve-out financials (often called "Combined" or "Carve-out" financial statements) present the business on a standalone basis with pro-forma adjustments.
Related terms
Separation Costs
One-time costs incurred to separate a carved-out business from its parent, including IT system separation, legal restructuring, and third-party service contracts.
Stranded Costs
Costs that remain at the parent company after a carve-out but which were previously allocated to the divested business, creating a cost gap.
Financial Due Diligence (FDD)
An independent review of a target company's historical and projected financials, conducted for a buyer or lender before completing a transaction.