A corporate carve out is the sale of a business unit rather than a company, and it carries a second deal inside it that is negotiated late and priced roughly: the transition services agreement that keeps the unit running after close. Carve outs are harder than ordinary sales for reasons that are all versions of the same problem, which is that the thing being sold was never a standalone business. This page sets out those reasons and prices the TSA.
The unit has no accounts of its own
Carve-out financials are constructed rather than reported: allocations of shared cost, management estimates of what standalone would look like, and a set of adjustments both sides will argue about. That construction is the single largest source of delay in the process and it starts before the buyer list does.
The unit has no systems of its own either
Payroll, IT, accounting, benefits and often the customer contracts run through the parent. Everything the buyer will need on day two either has to be built or has to be rented back from the seller, which is the TSA. Cataloguing it honestly before going to market is what separates a clean carve out from a contested one.
The TSA is the second deal, and it should be priced
On this site's TSA arithmetic, seven services at $4,200 a month with an 8% markup charge the buyer $31,752 a month, $381,024 across a twelve-month term, on $352,800 of underlying seller cost, with the markup returning $28,224. Expressing the markup in dollars rather than percent ends the argument about it faster than any other move.
People are the part nobody schedules
Which employees transfer, which are shared, and who has to be replaced on day one. Shared people are the hardest category because both sides need them, and a carve out that reaches signing without resolving them ships an unresolved argument into the first month of the TSA.
Questions people ask about corporate carve out
Why are carve outs harder than company sales?
The unit was never standalone: its accounts are constructed and its systems belong to the parent. Everything else follows from that.
What does a TSA cost?
On the worked example here, seven services at $4,200 a month with an 8% markup is $381,024 over twelve months, of which $28,224 is the markup.
When should the TSA be scoped?
Before going to market. A catalogue produced during exclusivity is a catalogue produced under time pressure by the party with least leverage.