{"id":5145,"date":"2025-02-26T20:04:51","date_gmt":"2025-02-26T19:04:51","guid":{"rendered":"https:\/\/maraz.es\/?p=5145"},"modified":"2026-10-12T17:50:55","modified_gmt":"2026-10-12T15:50:55","slug":"carve-outs-to-create-value","status":"publish","type":"post","link":"https:\/\/maraz.es\/en\/carve-outs-to-create-value\/","title":{"rendered":"Carve-Outs: Separating Part of the Business to Create Value"},"content":{"rendered":"<h2><strong>The carve-out in the context of M&amp;A<\/strong><\/h2>\n<p style=\"font-weight: 400;\">There are business groups which, over time, have accumulated very different businesses under the same corporate umbrella. An industrial division alongside a services line, a subsidiary in a different geographical market, or a property asset embedded in an operating company. Frequently, this heterogeneity does not reflect a deliberate strategy, but the sediment of years of organic growth and opportunities seized at the time.<\/p>\n<p style=\"font-weight: 400;\">The <em>carve-out<\/em> is the tool that makes it possible to surgically separate part of the business \u2014 a division, subsidiary or set of assets \u2014 with the aim of giving it its own identity and, with it, releasing value that remained hidden within the original structure. The premise is almost always the same: <strong>the sum of the parts is worth more separated than together.<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">In the context of M&amp;A, carve-outs are common both in large corporations and in family groups in the Spanish middle market: the owner who wants to sell their industrial business but keep the property, the company that divests a non-strategic line to concentrate resources, or the group seeking to attract a financial partner for a high-growth unit without diluting itself in the whole. By its nature, the carve-out is one of the most demanding transactions within <strong><a href=\"https:\/\/maraz.es\/en\/mergers-acquisitions\/\">M&amp;A and company sale advisory<\/a><\/strong>.<\/span><\/p>\n<h2><strong>Reasons for a carve-out<\/strong><\/h2>\n<p style=\"font-weight: 400;\"><strong>The reasons vary, although almost all converge on the same diagnosis: the segregated unit may be worth more on its own than integrated in the group.<\/strong><\/p>\n<ul>\n<li><strong>Strategic focus:<\/strong> shedding non-core units to recover management focus and allocate resources better.<\/li>\n<li><strong>Liquidity generation:<\/strong> financing investments, repaying debt or crystallising the value of an asset that has matured.<\/li>\n<li><strong>Attracting specialised capital:<\/strong> a financial or trade investor may be willing to pay a premium for that isolated division that it would not pay for the whole group.<\/li>\n<li><strong>Unlocking the multiple:<\/strong> a high-margin unit buried in a diversified conglomerate trades at a discount; separated, it can aspire to notably higher multiples.<\/li>\n<li><strong>Financial restructuring:<\/strong> separating assets facilitates negotiation with creditors or the raising of new financing.<\/li>\n<\/ul>\n<p>This last case is especially relevant when the group faces cash strain: isolating a healthy unit can be the lever that facilitates a <strong><a href=\"https:\/\/maraz.es\/en\/restructuring-financing\/\">debt restructuring and refinancing<\/a><\/strong> of the whole.<\/p>\n<p><strong>The main objective of a <em>carve-out<\/em> is for the separated unit to operate on its own, with its own strategies and resources, which can make both parts more efficient and more valuable.<\/strong><\/p>\n<h2><strong>Types of carve-out<\/strong><\/h2>\n<p style=\"font-weight: 400;\">Not all carve-outs are alike. The form the transaction takes depends on the objective pursued, the profile of the buyer or investor, and the tax and legal implications of each alternative.<\/p>\n<ul>\n<li style=\"font-weight: 400;\"><strong>Direct sale (trade sale).<\/strong> The parent company transfers the division or subsidiary to a third party \u2014 a trade operator or a financial investor. It is the cleanest structure and the one that generates immediate liquidity.<\/li>\n<li style=\"font-weight: 400;\"><strong>Entry of a minority partner.<\/strong> The segregated unit is placed in a new subsidiary into which an investor comes, with the parent retaining the majority stake. It makes it possible to obtain fresh funds and establish a reference value for the future. Repsol applied a variant of this formula when it segregated its exploration and production business, into which the EIG fund came with a 25% stake, crystallising the value of an asset the market undervalued within the energy group.<\/li>\n<li style=\"font-weight: 400;\"><strong>Spin-off.<\/strong> The parent company distributes the shares of the new entity among its own shareholders, creating a fully independent company. In Spain it is usually structured through a partial demerger under the Corporate Income Tax Act.<\/li>\n<li style=\"font-weight: 400;\"><strong>Split-off.<\/strong> A variant of the spin-off in which the parent&#8217;s shareholders choose whether to exchange their current shares for shares in the new entity, reducing the parent&#8217;s shareholder base. Less common in the Spanish middle market, but with relevant applications in family groups with shareholders whose interests diverge.<\/li>\n<li style=\"font-weight: 400;\"><strong>Joint venture.<\/strong> The segregated unit is placed in a structure shared with a third party, appropriate when collaboration between operators generates more value than competition.<\/li>\n<\/ul>\n<p>The success of a carve-out depends on meticulous planning. The process begins with a strategic assessment to define objectives and evaluate the feasibility of the transaction. The structure of the transaction is then designed, considering tax, legal and operational factors. Operational separation is one of the greatest challenges, since it involves decoupling IT systems, employment contracts and supplier agreements. Finally, negotiation, closing and transition management are carried out to ensure the stability of both the parent company and the new entity.<\/p>\n<h2>Defining the perimeter: what are we really selling?<\/h2>\n<p style=\"font-weight: 400;\"><strong>One of the most frequent mistakes in a carve-out is to start the sale process before having precisely defined which assets, contracts and people form part of the unit being segregated<\/strong>. This perimeter-definition phase seems obvious, but in practice it takes longer than expected and, if badly resolved, generates last-minute price adjustments.<\/p>\n<p style=\"font-weight: 400;\"><strong>The elements requiring the most attention are three:<\/strong><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><strong>Intellectual property<\/strong>: in businesses with software, data or their own brand, it must be determined whether the IP is transferred, licensed to the new entity or stays with the parent.<\/li>\n<li style=\"font-weight: 400;\"><strong>Group contracts<\/strong>: many agreements with suppliers \u2014 especially software licences and insurance \u2014 are signed at corporate level and require novation processes to transfer the relationship to the new owner, which gives suppliers room to renegotiate terms.<\/li>\n<li style=\"font-weight: 400;\">And <strong>shared human resources<\/strong>: staff who serve several divisions simultaneously must be clearly assigned before starting any process with buyers.<\/li>\n<\/ul>\n<h2>Standalone EBITDA and stranded costs<\/h2>\n<p style=\"font-weight: 400;\"><strong>In a carve-out, the division&#8217;s historical EBITDA is usually the wrong starting point. What matters to the buyer \u2014 and what the seller must prepare rigorously \u2014 is standalone EBITDA: what that unit would generate if it had to pay for all its services independently, without relying on the group&#8217;s shared resources.<\/strong><\/p>\n<p style=\"font-weight: 400;\">The adjustment can go in either direction. In many cases, the division has been charging its income statement with a share of centralised corporate expense \u2014 general management, finance department, IT infrastructure \u2014 that will disappear or be renegotiated at market terms, improving the normalised margin. In others, the opposite happens: the division benefited from services provided by the parent that were never billed to it, and which it will now have to contract on its own.<\/p>\n<p><em><strong>Stranded costs<\/strong> are the risk most frequently underestimated on the seller&#8217;s side. By removing a division, the parent is left with structural costs \u2014 rents, licences, corporate executives \u2014 that were previously spread across several units. If there is no plan to reduce or reallocate those costs at the same time as the sale, the parent&#8217;s consolidated margin will be permanently eroded.<\/em><\/p>\n<p style=\"font-weight: 400;\">Preparing a Financial Fact Book with segregated historical financial statements, documented cost-allocation criteria and a standalone projection is, today, a practical requirement for any process with institutional buyers. Building that standalone income statement and the financial infrastructure of the new entity is precisely where a <strong><a href=\"https:\/\/maraz.es\/en\/fractional-cfo\/\">fractional CFO<\/a><\/strong> adds value, equipping the unit with its own reporting, management control and treasury from day one.<\/p>\n<h2>Taxation in Spain: partial demerger and tax neutrality<\/h2>\n<p style=\"font-weight: 400;\">When the separation is structured through a partial demerger of a business line, <strong>the Corporate Income Tax Act allows the special regime for mergers, demergers and contributions of assets to be applied<\/strong> (articles 76 et seq.). This regime defers taxation of capital gains until the subsequent sale, which can make a very significant difference to the cash flows of the transaction.<\/p>\n<p style=\"font-weight: 400;\">For it to apply, the segregated unit must constitute a <strong>branch of activity<\/strong>: a set of assets and liabilities forming an autonomous economic unit, capable of operating by its own means. The Directorate-General for Taxation has developed extensive doctrine on this concept. <strong>In addition, the transaction must respond to valid economic reasons<\/strong> \u2014 its main purpose cannot be tax saving \u2014 and it must be notified to the Spanish Tax Agency within the prescribed deadlines.<\/p>\n<p>We go deeper into how corporate structure conditions taxation and the sale in our article on the <strong><a href=\"https:\/\/maraz.es\/en\/holding-company-business-valuation-sale\/\">holding company<\/a><\/strong>.<\/p>\n<h2>Employment framework: the transfer of employees<\/h2>\n<p style=\"font-weight: 400;\">One aspect that frequently surprises those tackling a carve-out in Spain for the first time is <strong>the employee transfer regime. When an &#8220;economic unit that retains its identity&#8221; is transferred, article 44 of the Workers&#8217; Statute imposes the automatic, mandatory transfer of employees to the buyer, which inherits their seniority, salary and terms and conditions.<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">Even more relevant from a risk perspective: transferor and transferee are <strong>jointly and severally liable for three years<\/strong> for employment and Social Security debts arising before the transfer. <\/span>This makes employment <strong><a href=\"https:\/\/maraz.es\/en\/financial-due-diligence\/\">due diligence<\/a><\/strong> a non-negotiable step for any buyer, and obliges the seller to have its employment and Social Security position fully cleaned up before starting the process.<\/p>\n<h2>The TSA: <strong>Transitional Service Agreement<\/strong><\/h2>\n<p style=\"font-weight: 400;\"><strong>Once the decision to segregate has been taken, the greatest source of operational friction is usually the interdependence between the unit being separated and the rest of the group:<\/strong> shared information systems, contracts in the parent&#8217;s name, teams serving several divisions, or a common treasury function.<\/p>\n<p style=\"font-weight: 400;\">The <strong>Transitional Service Agreement (TSA)<\/strong> <strong>is the contract under which the parent company continues to provide certain services to the separated unit for a limited period \u2014 usually between six and eighteen months \u2014 while the latter builds its own autonomous infrastructure.<\/strong> Its negotiation must include explicit service levels, pricing at market cost and, critically, exit milestones that incentivise the buyer to complete the transition without delay.<\/p>\n<p style=\"font-weight: 400;\">A badly negotiated or absent TSA is one of the main causes of post-closing friction. It must be defined during the preparation phase of the transaction, not after signing.<\/p>\n<h2>Impact on valuation<\/h2>\n<p style=\"font-weight: 400;\"><strong>The most immediate effect of a well-executed carve-out is the increase in the multiple.<\/strong> A division which, within a heterogeneous group, was valued with the so-called &#8220;conglomerate discount&#8221; can achieve significantly higher multiples when it operates and presents itself as an autonomous company, with its own clean standalone EBITDA, its own management and its own strategic narrative before the market.<\/p>\n<p><em>It is not unusual for a high-margin industrial division, buried within a diversified group, to obtain on its standalone sale an EV\/EBITDA multiple notably higher than it would have obtained as part of the whole. Separating in order to sell well is, in many cases, the best value-creation lever available to the owner.<\/em><\/p>\n<p><strong>Correctly quantifying that multiple differential \u2014 how much the unit is worth within the group versus how much it would be worth on its own \u2014 requires a <a href=\"https:\/\/maraz.es\/en\/business-valuation-sale\/\">professional business valuation<\/a> that normalises standalone EBITDA and builds the value story to be presented to buyers.<\/strong><\/p>\n<h2><strong>Risks and challenges of the carve-out<\/strong><\/h2>\n<p>While a well-executed carve-out can strengthen both parties involved, it also presents significant challenges that can jeopardise its success.<\/p>\n<p>One of the main risks is the <strong>lack of leadership and clear communication within both organisations.<\/strong> Without a well-defined structure, coordination problems can arise that delay the transition. Added to this is the complexity of financial management, since the segregated unit must establish its own administrative infrastructure. If this transition is not handled correctly, errors in financial reporting and difficulties in regulatory compliance can arise.<\/p>\n<p>Another major challenge is the <strong>impact on employees.<\/strong> Uncertainty about the future of the new entity can affect morale and the retention of key talent. To mitigate this risk, transparent communication and the implementation of incentives to ensure the stability of the team are essential.<\/p>\n<p><strong>Cultural differences<\/strong> can also pose a problem, especially if the segregated unit merges with another company or receives external investment. A lack of alignment in values, management styles and strategic objectives can hinder collaboration and integration. To avoid these conflicts, it is crucial to design cultural alignment programmes from the start of the process.<\/p>\n<p style=\"font-weight: 400;\"><strong>Underestimating the cost of autonomy.<\/strong> The resources needed for the unit to operate independently \u2014 its own finance function, information systems, insurance \u2014 are frequently underestimated. Those additional costs erode the standalone EBITDA presented to the market, with the consequent impact on price.<\/p>\n<p>Another key factor is <strong>operational continuity and the supply chain.<\/strong> If the transition is not carried out smoothly, there may be production stoppages, delays in product deliveries and loss of customers. Managing relationships with suppliers and customers must be a priority to minimise these risks.<\/p>\n<p>From a regulatory standpoint, <strong>legal compliance<\/strong> is an aspect that cannot be overlooked. Ignoring local and international regulations can lead to penalties and litigation. To avoid this, companies must have specialised legal advice in each jurisdiction.<\/p>\n<p>In addition, <strong>relationships with customers and suppliers<\/strong> can be affected if communication about the carve-out is not handled properly. Changes in the corporate structure can create uncertainty in the market and affect confidence in the brand. Keeping customers informed and ensuring continuity of service is essential to preserving their loyalty.<\/p>\n<p>Finally, another key aspect is <strong>capturing synergies<\/strong> between the parent company and the new entity. If opportunities for collaboration and resource optimisation are not identified, long-term profitability and growth may be compromised. Designing a clear strategy to maximise the value of the transaction is fundamental to ensuring its success.<\/p>\n<h2><strong>Conclusion<\/strong><\/h2>\n<p style=\"font-weight: 400;\"><strong>The carve-out is one of the most powerful value-creation tools for the business owner, but also one of the most demanding in terms of preparation and execution. Its success does not depend on the decision to separate, but on the quality with which that separation is designed: the definition of the perimeter, the legal and tax structure, the calculation of standalone EBITDA, the management of the employment framework and the narrative built for the market.<\/strong><\/p>\n<p style=\"font-weight: 400;\">When done well, it allows each part to be worth more than it was worth as a whole. When improvised, it can damage both parts simultaneously.<\/p>\n<p style=\"font-weight: 400;\"><strong>If you are considering the possibility of segregating a business unit within your group, at Maraz Corporate Finance we can help you define the optimal structure and bring the transaction to a successful conclusion. <\/strong><a href=\"https:\/\/maraz.es\/en\/mergers-acquisitions\/\"><strong>Contact us.<\/strong><\/a><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"color: #333399;\"><a style=\"color: #333399;\" href=\"https:\/\/www.linkedin.com\/in\/javierderojas\/\" target=\"_blank\" rel=\"noopener\"><strong>Javier de Rojas Roca de Togores<\/strong><\/a><\/span><\/p>\n<p><span style=\"color: #333399;\"><strong>Partner &#8211; Maraz Corporate Finance<\/strong><\/span><\/p>\n<p>&nbsp;<\/p>\n<h2><em>Frequently asked questions about carve-outs<\/em><\/h2>\n<h3><em>What exactly is a carve-out and how does it differ from a normal sale?<\/em><\/h3>\n<p><em><strong>A carve-out is the separation of a specific part of the business \u2014 a division, subsidiary or set of assets \u2014 to give it its own identity and sell or capitalise it separately<\/strong>. Unlike the sale of the whole company, it requires defining a perimeter (which assets, contracts and employees are transferred), calculating a standalone EBITDA and, often, a transitional services agreement (TSA). It is one of the most complex transactions within <a href=\"https:\/\/maraz.es\/en\/mergers-acquisitions\/\">M&amp;A advisory<\/a>, precisely because of that separation work.<\/em><\/p>\n<h3><em>Why can a separated unit be worth more than inside the group?<\/em><\/h3>\n<p><em><strong>Because of the so-called &#8220;conglomerate discount&#8221;: a high-margin division buried in a diversified conglomerate usually trades at a discount, because the market does not see it clearly. By separating it and presenting it as an autonomous company \u2014 with its own standalone EBITDA, management and strategic narrative \u2014 it can aspire to a significantly higher EV\/EBITDA multiple<\/strong>. Quantifying that differential requires a <a href=\"https:\/\/maraz.es\/en\/business-valuation-sale\/\">professional valuation<\/a> that normalises the unit&#8217;s figures.<\/em><\/p>\n<h3><em>What is standalone EBITDA and why is it so important?<\/em><\/h3>\n<p><em><strong>It is the EBITDA the unit would generate if it had to pay for all its services independently, without relying on the group&#8217;s shared resources.<\/strong> Historical EBITDA is often misleading: the division may have been charged corporate expenses that will disappear, or benefited from services that were not billed to it and that it will now have to contract. Preparing a rigorous standalone EBITDA \u2014 and setting up the financial infrastructure of the new entity \u2014 is where a <a href=\"https:\/\/maraz.es\/en\/fractional-cfo\/\">fractional CFO<\/a> adds value.<\/em><\/p>\n<h3><em>What happens to the employees in a carve-out?<\/em><\/h3>\n<p><em><strong>When an economic unit that retains its identity is transferred, article 44 of the Spanish Workers&#8217; Statute imposes automatic transfer:<\/strong> the buyer inherits the employment contracts, with their seniority, salary and conditions. In addition, transferor and transferee are jointly and severally liable for three years for employment and Social Security debts predating the transfer. That is why employment due diligence is non-negotiable and the seller must have its position fully cleaned up before starting the process.<\/em><\/p>\n<h3><em>Can a carve-out help a company with financial problems?<\/em><\/h3>\n<p><em><strong>Yes. Isolating and selling a healthy or non-strategic unit can generate the liquidity needed to repay debt or finance the core business, and it facilitates negotiation with creditors.<\/strong> In situations of cash strain, the carve-out is often combined with a <a href=\"https:\/\/maraz.es\/en\/restructuring-financing\/\">debt restructuring and refinancing<\/a> of the group as a whole, reorganising the liabilities around the resulting structure.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The carve-out in the context of M&amp;A There are business groups which, over time, have accumulated very different businesses under the same corporate umbrella. An industrial division alongside a services line, a subsidiary in a different geographical market, or a property asset embedded in an operating company. Frequently, this heterogeneity does not reflect a deliberate [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":2062,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[163],"tags":[],"class_list":["post-5145","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mergers-acquisitions"],"acf":{"team_member_autor":{"ID":1417,"post_author":"3","post_date":"2025-03-17 16:11:58","post_date_gmt":"2025-03-17 15:11:58","post_content":"","post_title":"Javier de Rojas Roca de Togores","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"javier-de-rojas-roca-de-togores","to_ping":"","pinged":"","post_modified":"2026-10-07 13:24:42","post_modified_gmt":"2026-10-07 11:24:42","post_content_filtered":"","post_parent":0,"guid":"https:\/\/maraz.es\/?post_type=team_member&#038;p=1417","menu_order":0,"post_type":"team_member","post_mime_type":"","comment_count":"0","filter":"raw"}},"_links":{"self":[{"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/posts\/5145","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/comments?post=5145"}],"version-history":[{"count":0,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/posts\/5145\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/media\/2062"}],"wp:attachment":[{"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/media?parent=5145"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/categories?post=5145"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maraz.es\/en\/wp-json\/wp\/v2\/tags?post=5145"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}