A strategic buyer wants to acquire our tech-enabled logistics division but leave our legacy freight brokerage with us. How do carve-out deal structures work, and how do we prevent intercompany overhead allocations from destroying the stand-alone EBITDA multiple of the unit we are selling?

Question

Tyler Smith · Accepted Answer

In a carve-out transaction, selling a high-margin subsidiary while retaining the parent entity introduces severe operational and accounting complexities. Buyers will not value the division based on how it performed while leaning on shared corporate resources; they will price it as a standalone enterprise. If you do not proactively disentangle operational dependencies, the buyer will assign heavy pro forma corporate expenses that severely reduce standalone EBITDA.

The first priority is auditing all intercompany transactions and shared overhead. Corporate administration, software licenses, human resources, facilities, and executive leadership are typically shared across both divisions. In diligence, the buyer's QoE team will assign full replacement costs to the carved-out entity for every shared service, while simultaneously questioning whether your legacy business can survive without the subsidiary's cash flow.

To protect the valuation multiple, execute a formal internal separation well before entering the market. Establish dedicated financial statements, clear transfer pricing agreements, and separate vendor contracts for the business unit being sold. If leadership currently splits time, adjust your Accountability Chart to assign distinct leaders with dedicated Scorecard accountability to each company.

In your purchase agreement, negotiate a comprehensive Transition Services Agreement (TSA). A TSA allows your parent company to provide accounting, IT, or administrative services to the buyer for a fixed monthly fee over a defined three-to-twelve-month window post-closing. This prevents the buyer from deducting huge standalone overhead costs from historical EBITDA, provides you with immediate post-close service revenue, and guarantees a smooth operational transfer.