What Makes Carve-Outs Different
A standard acquisition adds a business to an existing environment. A carve-out pulls a business out of one. That inversion changes every technology decision.
The carve-out target rarely had a standalone IT function. It ran on the parent’s ERP, the parent’s identity system, the parent’s productivity suite, the parent’s cloud tenancy, the parent’s network, the parent’s cybersecurity stack, the parent’s help desk, and the parent’s vendor contracts. Post-close, the carve-out has to run on something. That something is either a Transition Services Agreement in which the parent continues providing services temporarily, a rapid stand-up of a new standalone environment, or (in most cases) a mix of both across a negotiated window.
The engagement answers three questions the deal team has to have answers to before signing:
- What is actually shared? Full inventory of systems, licenses, identity, network, vendor contracts, data, and IT people that will need to be split, duplicated, reprocured, or hired.
- What should the TSA look like? Scope by service, duration by service, service levels, pricing structure, and step-down mechanics that make the TSA survivable for both parties.
- How does the carve-out stand up as its own IT function? Sequenced plan for building a standalone technology environment inside the TSA window, with milestones the parent can rely on and the acquirer can execute.
What the Engagement Covers
1. Shared-Systems Inventory
Full inventory of every system, license, identity, data store, network segment, vendor contract, and IT role that is currently shared with the parent or dedicated to the carve-out entity. This is the foundation for everything downstream. Nothing else in the plan works if the inventory is incomplete.
2. Entanglement and Separation Complexity Assessment
Every shared item scored on separation complexity: clean split, needs duplication and cutover, needs reprocurement, needs custom rebuild, or should stay on TSA long-term. The output is a decision matrix the deal team uses to price the deal, the acquirer uses to sequence work, and both parties use to negotiate the TSA.
3. TSA Scope and Duration Framework
Realistic TSA scope by service line, with defensible duration estimates that reflect actual separation complexity rather than negotiating positions. Service-level definitions that survive the first month post-close. Step-down mechanics that avoid the classic carve-out trap where the acquirer discovers on month five that they cannot separate on the timeline the TSA assumed.
4. Standalone IT Function Stand-Up Plan
Sequenced plan for the standalone technology function: identity and directory, productivity suite, ERP or business systems, cybersecurity stack, network, help desk and end-user support, cloud tenancy, and the vendor contracts that need to be assigned or reprocured. Milestones aligned to TSA step-down triggers. Staffing and MSP options for each function.
5. Data Separation and Migration Plan
Data currently in the parent’s systems that belongs to the carve-out, and data belonging to the parent that the carve-out has access to. Extraction and migration plan. Retention and destruction obligations by data class. Regulatory implications when applicable.
6. Cybersecurity Reconstitution
The carve-out’s cybersecurity posture is currently inherited from the parent. Post-separation, it has to be its own thing: EDR, SIEM, identity, backup, cyber insurance policy, incident response plan, security governance. Reconstitution plan sequenced against TSA step-down.
7. Vendor Contract Assignment or Reprocurement
Every material vendor contract categorized: assignable to the carve-out, requires reprocurement, requires renegotiation, or should be replaced entirely. Timeline impact on the TSA. Volume-discount implications where the parent’s pricing was tied to enterprise volume the carve-out will no longer aggregate.
Where carve-outs actually fail
Carve-out separations almost never fail on day one. They fail on month seven, when the acquirer discovers the ERP separation is 90 days behind schedule, TSA step-down triggers are missed, TSA fees start increasing on schedule, and the parent has already redirected its IT team elsewhere. Realistic TSA scoping in the planning phase is the single highest-leverage decision in the entire carve-out.
Timeline & Process
A standard 6–12 week planning engagement runs as follows:
- Weeks 1–2 — Shared-systems inventory. Interviews with parent IT leadership and carve-out IT contacts. Discovery against directory, vendor billing, and contract records. Inventory draft delivered.
- Weeks 3–5 — Entanglement and separation complexity assessment. Each shared item scored. Separation approach recommended per system. Draft decision matrix reviewed with the deal team.
- Weeks 5–7 — TSA scope, duration, and step-down framework. Service-line TSA drafted with defensible duration estimates. Service-level definitions. Pricing structure options. Draft reviewed with both parties if joint engagement.
- Weeks 7–10 — Standalone IT stand-up plan. Sequenced plan for the standalone technology function. Milestones aligned to TSA step-down. Staffing and MSP options.
- Weeks 10–12 — Final report, cybersecurity reconstitution plan, and vendor plan. Complete separation plan delivered. Data migration approach documented. Vendor contract disposition finalized.
Simpler carve-outs where the business unit already had semi-standalone IT compress into the shorter end. Complex separations with shared ERP, shared cloud tenancy, or international footprint run longer.
Deliverables
- Separation plan (40–70 pages). Complete shared-systems inventory, entanglement and separation complexity assessment, TSA scope and duration framework, standalone stand-up plan, cybersecurity reconstitution plan, data migration plan, vendor contract disposition.
- TSA scope document. Service-line TSA drafted with duration, service levels, pricing structure options, and step-down mechanics ready for legal negotiation.
- Standalone IT stand-up roadmap. Milestone-driven sequence for building the carve-out’s standalone technology function, mapped to TSA step-down triggers.
- Vendor contract disposition register. Every material vendor contract with recommended action, timeline, and pricing impact.
- Executive summary and deal-team briefing. Short summary for the investment committee or executive sponsor. Verbal briefing to the deal team.
Available as joint engagement
Both sides of a carve-out benefit from a shared independent view of what the TSA should look like. Vertex CIO can be engaged jointly by the parent and the acquirer to produce a single planning document both parties rely on. Joint engagement typically accelerates TSA negotiation by removing the classic asymmetry where each side’s advisor is arguing to a different set of numbers.
Scope Exclusions
The planning engagement is not:
- Post-close TSA execution or standalone stand-up delivery. The planning engagement produces the plan. Executing the separation typically extends 6 to 18 months post-close. Vertex CIO’s Fractional CIO engagement can be layered on to lead the execution.
- Financial or legal diligence. Financial modeling of TSA fees, legal drafting of the TSA agreement, and tax structure of the carve-out remain with the deal team’s existing advisors.
- A negotiation function. Vertex CIO produces the analysis. Both parties’ deal teams and legal counsel handle the negotiation.
Fees and When to Engage
Fixed project fees, known upfront. Typical range $20,000–$75,000 or more for a 6–12 week planning engagement. Complex multi-entity carve-outs, international separations, and carve-outs with shared ERP or shared cloud tenancy are scoped individually. Post-close TSA execution support and standalone stand-up leadership are engaged on separate retainer terms. No hourly billing. No contingent or success fees tied to close.
See our full pricing philosophy → — the reasoning behind fixed fees, and how carve-out planning sits alongside buy-side diligence and PE operating-partner engagements.
The best time to engage is during LOI negotiation or early in confirmatory diligence. The TSA is the single most consequential technology document in a carve-out; drafting it without an independent separation plan almost always produces a TSA that fails somewhere between month four and month nine post-close.