What is a carve-out?

Carve-outs usually involve a transition services agreement (TSA), under which the seller keeps providing IT, payroll or other back-office support for a fixed period while the buyer builds standalone functions. Financials are often carved from consolidated accounts, so historical figures can be hard to verify. Not to be confused with a spin-off, where shares go to the parent’s shareholders rather than a buyer.

Say a large company sells its $400 million-revenue packaging division to a private equity firm. The division must now run its own payroll, IT and finance.

Buyers often pay less for a neglected unit, but it needs its own systems, staff and contracts from the first day.

• Consonance Capital grows healthcare flagship by 58% with $1.35bn hard cap close
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• Sopris Capital completes carve-out of Edinburgh AI firm Blackford from Bayer
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