Carve-Out M&A: 2 Real Case Timelines & Metrics

Carve-out transactions in M&A matter because they unlock value from assets that don’t fit a parent’s core strategy anymore, and they fund growth or debt reduction without a full sale of the parent. I’ve seen these plays in the field for years, and the pattern is clear: you separate a subsidiary, division, or business unit, set it up as a stand-alone entity or minority stake, and sell it to private equity, strategics, or via an IPO. The work is heavy on governance, systems, and contracts, but the payoff can be real if you manage transitions and TSA (Transition Service Agreement—cost-sharing договор for post-separation services) costs tightly.

Let’s loxk in the basics first. A carve-out isn’t a single sale; it’s a process that typically runs 12-18 months, with costs running around 1-3% of deal value.

You’re coordinating finance, legal, IT, and HR because shared platforms, customer contracts, supply agreements, and licenses have to be reallocated or restructured. The main types are equity carve-outs (a minority stake via IPO or private placement), full divestitures, and spin-offs that often follow the carve-out to create a separate, independent entity.

Market data backs what I’ve seen on the ground. In 2024, carve-outs accounted for about 24% of worldwide M&A transactions, and that trend isn’t fading. A lot of large companies expect to run at least one carve-out by 2026, around 70% per EY’s Global Divestment study. Private equity is deeply involved, with about 45% of global PE deal value coming from carve-outs. But there’s risk: roughly 40% of carve-outs underperform because of weak transition planning. Digitally enabled carve-outs tend to deliver about 25% higher EBITDA growth, and spin-off IPOs after carve-outs can outperform by 18-22% over a 3-year window. Broader M&A activity also points to a strong 2025-2026 horizon, with global M&A value rising 41% to about $4.8 trillion in 2025 and the US market seen improving into 2026 thanks to rate cuts and AI adoption.

From a practitioner’s view, the economics hinge on how you handle transitions. Transition Service Agreements are the baseline tool for cost-sharing and smooth operation during separation, but you have to define duration, scope, and pricing clearly to avoid evergreen liabilities or misaligned incentives. If the TSA is too generous or too short, you either burn cash or risk operational disruption for the new entity.

A real-world North Star is portfolio simplification. If the parent wants to double down on core strengths, a carve-out helps reallocate resources more efficiently, reduce regulatory or litigation risk, and create a more transparent investment thesis for the market or PE buyers. But you must align regulatory expectations, antitrust concerns, and national security considerations where applicable. In the US, regulators have shown willingness to approve divestitures as remedies in large-scale deals when the alternative would be a vertical or horizontal consolidation that harms competition. The Synopsys/Ansys $35B deal clearance via divestitures is a recent example of structural remedies being used to unblock a cross-border deal flow.

Historical context matters, too. Carve-outs grew in prominence after the 2008 financial crisis as conglomerates refocused on core assets. Siemens’ 2020 carve-out into Siemens Energy AG is a classic case of sharpening parent strategy while creating a focused renewables and power business. The trend accelerated with ongoing inflation, macro volatility, and the need to fund strategic shifts in healthcare, manufacturing, and tech.

Now, a concrete case study to illustrate the mechanics and the outcomes. The 3M carve-out of its healthcare business into Solventum Corporation in 2024 is a high-profile example you can anchor to. The spin-off was tax-free and completed February 1, 2024, with an initial market cap around $16.4 billion at launch. The intent was portfolio simplification, 3M wanted to double down on core industrials while isolating a high-growth healthcare arm that included medical devices and health IT.

The move aimed to reduce exposure to PFAS-related liabilities and litigation while giving Solventum the operating independence and investment profile needed to pursue growth through acquisitions or internal R&D acceleration. The deal structure included a careful allocation of shared services, transfer pricing arrangements, and transitional support to ensure continuity of supply, customer relationships, and regulatory compliance.

From my seat, the execution lessons are plain. First, start with a clean data room and a detailed separation map that covers IT, finance, HR, legal, and operations. Second, lock in TSA terms that are truly time-bound with clear exit triggers; avoid open-ended cost sharing that bleeds value. Third, design the governance model for the carved entity early, including a robust IP ownership plan, intercompany charging policies, and a clear plan for stand-alone reporting and controls. Fourth, stress-test the separation against key customers and suppliers; a carve-out can lose revenue if contracts are not properly assigned or terminated with minimal disruption. Fifth, align communication with investors, lenders, and counterparties; the narrative has to be credible about why the carved unit can operate independently and how it funds its own growth.

On performance expectations, digital enablement and strong transition planning matter most. Carve-outs that leverage digital platforms for data migration, ERP decommissioning, and cyber controls tend to see EBITDA improvement around 25% versus peers without digital drives.

For exit outcomes, spin-offs that reach the market with the right capitalization and growth roadmap tend to post 3-year IPO returns in the 18-22% range above sector benchmarks. Investors want clear margins for a standalone entity and a credible path to scale.

For practitioners counting on deal flow, the 2025-2026 outlook is favorable but selective. The US M&A scene points to steady growth, aided by expected rate reductions and AI-driven efficiency gains. Carve-outs are relevant as strategic tools to maximize value and minimize drag on the parent’s portfolio. Private equity remains keen on carve-outs because the assets often come with a built-in path to value creation via margin improvements, growth investments, and operational optimization.

In practical terms, if you’re evaluating a carve-out for your client, whether as the adviser or the operator, start with a tight scope. Map the assets, define the standalone capabilities, and quantify transition costs up front.

Build a TSA that’s precise on duration and cost, and prepare a detailed stand-alone operating plan with targeted EBITDA, working capital, and capex profiles. Ensure the carve-out can access capital markets or PE funding on favorable terms, with a credible merger or acquisition pathway if the carved unit needs a future parent.

Case in point: the 3M/Solventum example demonstrates the value and risk in one package. The healthcare carve-out unlocked a strategy-focused unit while the parent preserved capital allocation flexibility and reduced liability exposure. The outcome depended on disciplined execution, clear separation boundaries, and a strong investor narrative about Solventum’s standalone growth trajectory and its ability to deliver on promised synergies without compromising ongoing operations for 3M’s core businesses.

Bottom line for readers: carve-outs are powerful when tied to a clear strategy, a solid separation plan, and disciplined execution. They require careful forecasting, robust governance, and precise TSA design. They also benefit from digital enablement and a credible growth plan post-separation. If you’re building or evaluating a carve-out, you’re balancing speed, certainty, and value capture. Get the structure right, and you can create a scalable, independent entity that funds future opportunities without dragging the parent down.

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I should have said this sooner: nailed it when you bring a clean separation, a tight TSA, and a solid standalone plan to the table. If you’re evaluating a deal, a few days ago I asked a colleague to pull together the latest data on carve-outs from EY, McKinsey, Deloitte, and MoFo, the numbers don’t lie, and they’re alive with real-world implications for 2026.