A buyer wants to acquire our tech-enabled subsidiary but wants to leave our legacy service unit behind. How do we structure a carve-out transaction using our Accountability Chart to ensure a clean split without destroying our remaining business?

Question

Tyler Smith · Accepted Answer

Carving out a subsidiary is a complex operational puzzle. The buyer wants to acquire the profitable tech-enabled unit without taking on any of your legacy liabilities, but your teams, software licenses, and office spaces are likely shared.

To pull off a clean carve-out, you must start with your Accountability Chart. Draw a clear line of demarcation between the two operating units. You need to create two distinct Accountability Charts: one for the entity being sold and one for the legacy business staying behind.

Every seat on the subsidiary's chart must be filled by people who fully GWC™ their roles and will transition to the buyer. Any shared services, like accounting, human resources, or IT support, must be explicitly addressed.

If these shared services are staying with the legacy company, you must negotiate a Transition Services Agreement. Under a Transition Services Agreement, your legacy team provides administrative support to the buyer for a fee for a set period, such as six months, giving the buyer time to build their own infrastructure.

This prevents operational chaos immediately after closing. By using your weekly Scorecard metrics, you can prove to the buyer that both business units can function independently. A well-structured carve-out protects your remaining business while maximizing the valuation multiple on the high-growth subsidiary.