A buyer wants to acquire our core operating division but leave behind our legacy field service unit inside our corporate entity. How does an asset carve-out or subsidiary purchase structure impact working capital allocation and stranded corporate overhead?

Question

Tyler Smith · Accepted Answer

Carve-out transactions are operationally messy and financially treacherous. When a buyer purchases only your primary division through an asset purchase, they cherry-pick your best revenue, best talent, and top clients, while leaving you holding long-term facility leases, shared software licenses, and stranded administrative payroll.

If you do not price this separation cleanly, your remaining legacy business will bleed cash post-close.

First, conduct a zero-based audit of your corporate overhead. Shared services like finance, human resources, executive leadership, and IT infrastructure are typically funded by the core division. If sixty percent of that overhead was supported by the unit being sold, determine immediately whether those costs can be eliminated overnight or if they become stranded. If your remaining division cannot support that overhead, you must either transfer those personnel into the acquired entity or require the buyer to cover them through a formal Transition Services Agreement (TSA).

Second, negotiate the Transition Services Agreement aggressively. If the buyer needs your remaining staff to run payroll, billing, or technical operations for six to twelve months post-close, price those services at cost plus a fifteen to twenty-five percent administrative markup. Set hard termination dates so your team does not become an underpaid, permanent support desk for the buyer.

Third, address working capital separation. Buyers often try to calculate the net working capital target using historical corporate-wide averages. This leaves your remaining unit starved for operating cash. Disaggregate historical accounts receivable, inventory, and deferred revenue strictly by business unit.

Update your Accountability Chart immediately to reflect the split organization. Every seat must have clear responsibilities for the remaining unit so your core team is not paralyzed by the carve-out during diligence and closing.