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How carve-outs can provide a strategic advantage in complex exits

Carve-out transactions are among the most complex acquisition scenarios due to the need to separate operational, financial, legal, and cultural elements from the parent company.
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By Emily Morris , 

Senior Vice President, Transaction Advisory, Private Equity and M&A

02/03/2026 · 3 minute read

Carve-out transactions are among the most complex divestiture scenarios for sellers exiting part of a business due to the need to separate operational, financial, legal, and cultural elements from the parent company. Successfully navigating this complexity requires careful coordination across multiple functions to allow for a smooth and effective separation. However, when approached strategically, a carve-out presents a significant opportunity for sponsors to unlock value and position the remaining business for long-term success.

Sellers that plan early and adopt customized risk management solutions can not only minimize disruption to ongoing operations but also enhance the attractiveness of the carved-out entity to potential buyers, thereby maximizing transaction value.

Key considerations for sellers in carve-out transactions

Due to their complexity, it is important for sponsors to think strategically about their carve-out approach. Considerations include:

  • Defining a clear deal perimeter, paying particular attention to financial transparency: Sellers should focus on clearly delineating the transaction perimeter, shared services, and financial allocations from the outset. For example, precisely identifying which entities, contracts, and liabilities are included or excluded from the carve-out reduces due diligence friction and builds buyer confidence in the accuracy and completeness of the information provided.
  • Proactively managing transitional service agreements (TSAs): Sellers need to design well-structured TSAs that clearly specify the essential services the carved-out business will continue to rely on the parent company for, including defined responsibilities, service levels, and timelines. This clarity helps minimize operational disruption and potential disputes — such as those related to shared IT systems — allowing for continuity for the carved-out entity while it establishes its own infrastructure. A carefully crafted TSA also mitigates risks for the seller by setting clear expectations and limits on ongoing obligations.
  • Ringfencing legacy exposures: Sellers must identify and allocate legacy liabilities — such as litigation, environmental obligations, tax exposures, and other contingent risks — early in the process. Properly managing these exposures helps protect the seller from post-close surprises and allows for the value of the transaction to be preserved. For example, in an industrial carve-out, proactively separating legacy environmental obligations was critical to avoiding financial liabilities after closing.

By addressing these considerations proactively, sellers can facilitate a smoother carve-out process, reduce risks, and maximize the full potential value when divesting part of their business.

How Marsh Risk can help

Marsh Risk supports sellers with solutions designed to reduce risk, strengthen certainty, and preserve value, including:

  • Insurance vendor due diligence to address typical bidder queries at the outset and enable the seller to receive more credible bids early in the process.
  • Day-one-ready standalone insurance to avoid bidders overestimating insurance costs in their modelling and provide execution certainty.
  • Warranty and indemnity (W&I) insurance (also known as representations and warranties (R&W) insurance) to protect sellers from post-transaction claims and provide buyers with confidence in the deal.
  • Tax insurance to address uncertain tax positions and safeguard both the seller and the carved-out entity from unexpected tax liabilities.
  • Contingent risk solutions to manage litigation, regulatory matters, or other known exposures that could impact the transaction or post-close outcomes.
  • People and organizational support to assess leadership continuity, workforce transition, and cultural alignment, helping to facilitate a smooth separation.
  • Strategic risk advisory to help sellers anticipate and navigate potential deal obstacles, enabling proactive risk mitigation and a smoother deal execution.

Our goal is to help sellers mitigate exposure and accelerate the carve-out process, positioning the divested business for a successful transition and long-term value creation, while protecting the interests of the remaining organization.

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