Carve-out transaction

Definition

A Belgian industrial group decides to divest its specialty chemicals subsidiary to focus on its core packaging business. The subsidiary has €18m revenue and €3m EBITDA: a standalone-attractive unit. But it shares the parent's ERP system, uses the parent's sales force in three countries, sources IT support and HR services from the parent, and operates from a facility shared with the parent's packaging operations. Selling this subsidiary requires not just a buyer but a full operational separation. This is a carve-out transaction, and it's materially more complex than selling a standalone business.

The Benelux 2026 carve-out preparation framework. Five standard work-streams: (1) Financial separation: building standalone financial statements for the carved-out unit, often requiring 6-12 months of "carve-out audit" by Big 4 accountants to allocate shared costs, identify trapped corporate overhead, and produce credible historical EBITDA. (2) IT separation: migrating from parent ERP to standalone systems, often via a transitional services agreement (TSA) covering 12-24 months. (3) Customer/supplier separation: converting joint customer contracts to standalone, separating procurement relationships. (4) Workforce separation: identifying which employees move, which stay with parent, and which need new hires. Belgian and Dutch works council consultation is mandatory and adds 4-8 weeks to the timeline. (5) Real estate separation: physical location split if shared with parent operations.

The transitional services agreement (TSA) mechanic. After closing, the carved-out business often can't operate fully independently for 12-24 months. The TSA defines what services the parent continues to provide, at what cost, for what duration. Standard 2026 Benelux TSA scope: IT systems (most common, 18-24 months), HR services (12 months), payroll processing (3-6 months), legal/compliance support (12 months), facility management (6-12 months for shared locations). TSA pricing typically at cost-plus 5-15%: parent doesn't profit from TSA but covers its costs.

The carve-out value-leakage problem. Standalone EBITDA on a carved-out business is rarely as strong as parent-allocated EBITDA suggests. Common leakage drivers: (1) Trapped corporate overhead: shared CFO, HR director, legal counsel costs that need standalone replacement. Typical leakage: 3-7% of EBITDA. (2) Lost procurement leverage: losing parent's combined purchasing power on shared inputs. Typical leakage: 2-5% of EBITDA. (3) IT replacement costs: buying new systems vs sharing parent's. One-time cost typically €500k-€3m for mid-market. (4) Customer-relationship friction: some customers chose the parent group, not the carved-out unit; 5-15% post-carve-out customer attrition is normal. (5) Talent retention friction: employees may prefer to stay with the larger parent group rather than the smaller carved-out entity.

The Benelux 2026 carve-out buyer landscape. Three buyer archetypes. (1) Strategic add-on acquirers: buying the carved-out unit to combine with their existing operations, capturing both the standalone business value and synergy capture from integration. Most common for €5-30m carve-outs in fragmented sectors. (2) PE platforms in same sector: buying to add to an existing platform with operational improvement and roll-up thesis. (3) Specialised PE turnaround funds: buying underperforming carve-outs at lower multiples with operational improvement plans. Carve-outs typically clear at 0.5-1.0x EBITDA below standalone-comparable multiples to reflect separation costs and risk.

A worked Benelux example. A Dutch listed industrial group divests its specialty chemicals subsidiary (€18m revenue, €3m parent-allocated EBITDA) in 2026 to a Belgian PE platform. Pre-carve-out preparation: 9-month financial separation work, €1.4m cost. Standalone EBITDA after corporate overhead allocation: €2.6m (vs €3m parent-allocated). Sale process: 6-month auction, three bidders, clearing at 5.0x standalone EBITDA = €13m. TSA: 18 months for IT and HR, €600k total cost. Total transaction value to parent: €13m. Total parent cost (preparation + TSA + advisor fees): €2.6m. Net divestiture proceeds: €10.4m. Time from decision to close: 18 months. Complexity premium vs equivalent clean sale: ~20% discount + 6-9 months longer timeline.

Worked example

Revenue: €18m. Parent-allocated EBITDA: €3m. Standalone EBITDA (post-overhead): €2.6m. Sale price: €13m (5.0x standalone EBITDA). Carve-out preparation: 9 months, €1.4m. TSA: 18 months, €600k. Net divestiture proceeds: €10.4m. Total time from decision: 18 months. Complexity vs equivalent clean sale: ~20% discount + 6-9 months longer.

When it matters

Carve-out transactions occur when a parent company divests a non-core business unit. The seller (parent) bears 3-7% of transaction value in preparation costs and faces 15-25% value erosion vs equivalent standalone business due to separation complexity and post-closing TSA dependencies. The buyer faces higher operational integration risk and typically demands a 0.5-1.0x EBITDA discount vs standalone-comparable deals. For both sides: rigorous separation preparation in the 6-12 months before sale launch determines whether the carve-out is value-creative or value-destructive.

Frequently asked

How does carve-out EBITDA differ from parent-allocated EBITDA?

Always lower in our practice. The parent typically allocates corporate overhead (CFO, HR, legal, IT) using rough metrics (revenue percentage, headcount, square footage). When the carved-out business stands alone, it discovers that standalone equivalents of those services cost more: typically 30-60% more: than the parent allocation suggested. Standalone EBITDA in Benelux 2026 mid-market carve-outs typically runs 10-20% below parent-allocated EBITDA after proper Big-4 normalisation.

Can a TSA continue indefinitely after closing?

Not in well-structured Benelux 2026 deals: TSAs typically include sunset clauses with 18-24 month maximum durations and step-up pricing to incentivise the buyer to complete migration. Indefinite TSAs create dependency risk for both parties: buyer can't fully integrate operations; seller can't fully exit the relationship. Best practice: define specific service levels, end dates, and transition milestones in the TSA at SPA signing, with quarterly progress reviews and clear default consequences if migration falls behind schedule.

How long does a carve-out typically take from decision to closing?

12-24 months in Benelux 2026 mid-market practice. Decomposition: 6-12 months pre-sale preparation (financial separation, IT mapping, customer/supplier analysis), 4-8 months sale process (auction, DD, SPA negotiation), 2-4 months pre-closing operational separation (works council consultation, regulatory clearances). For comparison: equivalent clean SME sales typically run 6-12 months end-to-end. The carve-out preparation premium is real and unavoidable.