Building a narrative: Carve-out numbers are the easy part—it’s the story that sells

In today’s mergers and acquisitions environment, deals involving carve-outs continue to be of critical importance for both buyers and sellers. And while the financials matter, they’re no longer enough to drive a deal to completion. To maximize success, sellers must pair the numbers with demonstrable separation readiness to provide a holistic narrative that resonates with buyers.

Carve-outs are no longer just about shedding noncore assets. Increasingly, they’re strategic moves to unlock hidden value, streamline portfolios, respond to activist shareholder pressure or pursue transformation. Private equity firms are drawn to carve-outs for their untapped potential and opportunities for operational improvement. Strategic buyers view them as bolt-on additions to accelerate growth. Yet despite this rising popularity, sellers often miss the mark where it matters most—positioning.

Too many carve-outs come to market with robust data rooms and scrubbed financials, yet fall short when it comes to addressing critical separation and operational matters that can make or break the value and timing of a transaction. In many cases, the seller assumes the value is self-evident. But buyers aren’t interested in just deciphering your spreadsheets—they want to be sold a vision. And when that vision is absent or unclear, even the most financially sound assets can struggle to gain traction in the market or attract discounted offers.

Operational readiness: The proof behind the pitch

If the story is the pitch, operational readiness is the proof. Buyers want to see what is being done to separate the business and that the seller understands the hard work to make that happen. This is where many deals falter.

Preparing for separation requires sellers to think operationally and be clear about what buyers will and will not get in the deal. Three key matters to contemplate are the deal perimeter, the separation plan and transition service agreements (TSAs).

Setting a clear perimeter is the starting point. Buyers need to know exactly what’s in scope, what’s excluded and what shared services may still be entangled with the parent. Ambiguity around the deal perimeter creates friction, increases perceived risk and complicates integration planning.

Once the perimeter is clear, sellers need to demonstrate that separation matters are being thoughtfully addressed. While sellers may not always carve out or provide back-office support, they should be prepared to show that core business functions—finance, human relations, information technology, legal and operations—can be separated and stood up on their own if necessary from Day 1. This means demonstrating that the right people, systems, processes and governance models are either in place or can be transitioned smoothly to minimize disruption and support business continuity.

And finally, sellers need to make clear what transition services may or may not be provided. While TSAs can help ease a separation, they should be structured as short-term solutions—not long-term dependencies. Buyers favor arrangements that are appropriate in duration, well defined in scope and supported by clear exit plans.

The details that matter to buyers

From the supporting materials and diligence requests we see every day, it’s clear that buyers are getting increasingly sophisticated—and specific. They’re asking for bottom-up cost builds rather than high-level allocations. They expect functional-level assessments of head count, IT architecture and key personnel. They want to see one-time cost estimates for critical stand-up investments such as core systems (enterprise resource planning, human resources information, customer relationship management), cybersecurity infrastructure, rebranding efforts and legal entity formation. And they’re placing a premium on clean, sequenced exit strategies and TSA support that won’t become deal blockers down the line.

Without this level of operational visibility, even the strongest story can begin to unravel. Credibility hinges on a seller’s ability to connect the dots between narrative and execution.

Blind spots that can derail value

Despite best intentions, sellers often overlook key challenges that can materially affect deal value. The best separation plans help mitigate risks around IT, talent, and change management.

IT disentanglement is a common issue. Shared systems are often more deeply embedded than anticipated, and separation delays can disrupt timelines, increase costs or even tank buyer confidence.

Talent retention cannot be ignored. When key employees aren’t informed, incentivized or aligned, they may leave—taking institutional knowledge with them. Buyers notice this instability, and it can influence both their offer price and their willingness to proceed.

And change management often tends to be an afterthought. Separation creates uncertainty, and without a communications plan and leadership alignment, business performance can suffer. Just as important, sellers need to demonstrate not only that they have a plan for their own organization, but also that they can align with the buyer’s change management approach. A coordinated, cohesive message to employees across both organizations builds confidence, reduces disruption and signals that both sides are committed to a smooth transition.

And perhaps most critically, sellers often craft a compelling story that isn’t fully supported by the underlying data. If the narrative promises growth but the key performance indicators say otherwise, buyers start to doubt everything else they’re being told.