We are considering selling only one division of our company while retaining the core business, but we are confused about how to structure this corporate carve-out. How do we divide our leadership team and shared services without killing the valuation of the division we want to sell?

Question

Tyler Smith · Accepted Answer

A corporate carve-out is one of the most complex deal structures to execute because it requires you to untangle a single operating system into two distinct entities. Buyers of a standalone division want to see a business that can function on its own from day one. If the division you are selling relies heavily on shared services like accounting, marketing, or human resources from your parent company, the buyer will discount the valuation to cover the cost of rebuilding those functions.

To preserve the valuation of the division, you must use your EOS Accountability Chart to clearly define the boundaries of both businesses before you launch the sale process. Identify which leaders and team members belong exclusively to the division being sold. These individuals must fully GWC their roles within the target division, showing the buyer that the business has its own operational engine.

For shared services that cannot be easily split immediately, prepare a Transition Services Agreement. This agreement outlines how your parent company will support the sold division with administrative tasks for a set period post-close, typically three to six months. This gives the buyer time to build their own infrastructure without disrupting operations.

Additionally, you must separate your financial reporting. Use your weekly Scorecard to track the division's specific performance metrics, ensuring all revenue and direct costs are cleanly allocated. By proving that the division has its own leadership, its own metrics, and a clear operational path to independence, you minimize the risk for the buyer and secure a much stronger valuation.