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Planning For A Carve Out

What is a carve out?

A carve out is the means by which part of an integrated business is separated out and sold to a third party.

Why would an organisation want to carve out part of its business?

  • It may want to re-focus on its core activities,
  • It may want to release part of the value in its business.

One of the biggest risks to the success of a carve out is a lack of recognition of the myriad of areas of the business that the carve out affects.

This article is intended to provide food for thought if you are considering buying or selling a business through a carve out.

Transitional arrangements

It is likely that no matter how well prepared you are, there will still be some period of time during which the businesses are going through the process of being de-coupled.  What services are provided to the outgoing part of the business by the rest of the business?  Are the premises from which the business operates shared?

Commercial property

If the premises are shared and leased you will need to get your landlord on side.  Once contracts are exchanged it is likely that you will be in breach of the obligation not to share occupation.


If the carve out is proceeding by way of an asset sale then TUPE will apply (together with its obligations to inform and consult) but there may be some investigation required to ascertain which employees who are shared between the different businesses will end up with which business.


Does the existing organisation have any licences or permits that are required for the operation of the business being carved out?  The buyer will need to ensure that it has obtained the required licences or permits.  IT licences will often just be in the name of the seller – can those software licences relevant to the carved out business be assigned to the buyer?  Can the IT systems be separated?

Tax considerations

Tax considerations are often a driver for the format of the transaction.  Sellers may consider transferring the business to a newco subsidiary set up for that purpose and then selling the shares in that newco.  You will need to take specialist advice from your accountants.


Where does the business operate from?  Is the building shared between the business being retained and the business being sold.

Considering all these points in advance will increase the chances of a smooth transition of the business being sold out of the parent.

If you need any advice please contact the Corporate & Commercial Team