Divestiture, carve-out and separation FAQs
What is the difference between a divestiture, carve-out and separation?
A divestiture is the sale, spin-off, or disposal of a business or asset. A carve-out involves separating part of a larger organization, so it can be sold, spun off, or operated independently. A separation is the work required to disentangle that business from the parent—covering people, systems, contracts, financials, data, legal entities, and operations.
When should a company start preparing for a divestiture?
Before going to market. Early preparation helps define the deal perimeter, identify diligence issues, prepare financial and operational information, assess tax and regulatory considerations, and determine what must be separated by close or Day 1.
What causes value leakage in a divestiture?
Value leakage often stems from underestimating separation complexity, standalone and stranded costs, TSA obligations, talent risk, systems dependencies, tax impacts, lost focus on protecting the core, or buyer diligence concerns—any of which can reduce buyer confidence, slow the process, affect price, or create post-close disruption.
What is sell-side financial due diligence?
Sell-side financial due diligence helps sellers identify and address financial issues before buyers do. It typically includes quality of earnings, working capital, net debt, standalone cost review, and revenue and margin analysis.
What are carve-out financial statements?
Carve-out financial statements present the financial position and results of a business that operates as part of a larger company. They typically require complex allocation methodologies, separation of shared costs, standalone assumptions, and coordination across accounting, tax, operations, and reporting teams.
What is a transition services agreement, or TSA?
A TSA defines services one party provides to another after close. In a divestiture, TSAs commonly cover IT, finance, HR, procurement, facilities, and operations. Poorly scoped TSAs can create cost, complexity, and operational risk for both parties.
What are stranded costs?
Stranded costs are costs that remain with the seller after a divestiture—typically from shared services, corporate overhead, systems, facilities, or vendor contracts that previously supported the divested business. Addressing them early is critical to protecting the economics of the retained organization.
How can AI and analytics improve divestiture outcomes?
AI gives deal teams a decisive advantage when speed and clean execution matter most. By processing large volumes of financial, operational, and contract data, AI automates complex tasks—TSA drafting, contract assessment, separation risk analysis—accelerating time-to-value while reducing execution risk. Teams move faster, make better decisions, and surface issues earlier, from separation scenario modeling to readiness tracking across the deal lifecycle. At KPMG, these capabilities are embedded in our work—vs fragmented platforms.
How long does a divestiture take?
Timing varies widely based on deal size, data availability, regulatory requirements, separation complexity, and the number of shared systems, contracts, and functions involved. Divestitures can close in months; complex carve-outs or spin-offs can take significantly longer.
