Unlocking value in carve-outs – why integration planning deserves top priority in every carve-out

When integration is treated as an afterthought — something to be dealt with after signing or even after closing — the cracks quickly begin to show. Critical technology systems and data remain intertwined between the seller and the target, knowledge transfer is forgotten, duplicate costs accumulate, and time is wasted. Ultimately, the value that was carefully identified during due diligence and the effort put into the transaction negotiations quietly erode.

The takeaway is clear: integration must be a core workstream from the very beginning of the process, running in parallel with due diligence and other transaction workstreams, maximising the value of the investment and positioning the business for future growth or exit.

Due diligence: turning separation friction into value creation

Due diligence in a carve-out transaction should do more than identify risks — it should also actively map the path to separation. A key starting point is to identify which technology systems and infrastructure the target business shares with the seller, since these will either need to be separated, or rebuilt as standalone systems.

For a strategic buyer, the question is how the acquired business fits into existing systems and processes. For a private equity buyer, there may be no pre-existing infrastructure at all, meaning the gaps identified are not just integration challenges but foundational building blocks that need to be built from the ground up. For private equity, this creates a significant opportunity to generate value and strengthen the platform investment for the long term.

Non-core businesses often struggle with outdated technology systems, underdeveloped data governance, and poorly structured supplier contracts — most of which will not be immediately visible on the surface. These areas of neglect must be identified as well in order to maximise the potential of the investment. The due diligence should actively probe the quality and maturity of the underlying systems and data infrastructure — not just verify what is being acquired. Where issues are found, they should be reflected in the transaction agreements through pricing, indemnities, or tailored obligations in the separation plan.

Carve-out transactions often raise competition law issues, requiring regulatory filings and careful coordination to avoid gun jumping, especially when sharing sensitive information during integration planning. As a result, integration planning may be delayed, leaving buyers unprepared and exposed to operational risk at closing. Since many technology systems are crucial for the carved-out business, even brief disruptions can cause significant financial loss, reputational harm, and damage customer relationships. Information security adds a further layer of complexity, as the separation of shared systems and data environments must be executed without creating vulnerabilities or exposing either party to cyber risk.

Provided that the competition law and carve-out legal teams work together from the outset, they are usually able to find a compliant way to address all relevant aspects of the transaction. With proper safeguards like clean teams and clear information-sharing protocols, parties can plan carve-outs and integration efficiently and compliantly. Skilled advisers keep the process on track and avoid delays.

The carve-out workstream often catches buyers off guard

Technology separation and data migration often receive limited focus in carve-out transactions. Parties too often underestimate both the complexity and the timeline required to separate shared technology systems. What appears straightforward during due diligence can take significantly longer than expected when legacy architectures and interdependencies come into play.

Without a clear data inventory and data ownership mapping before migration begins, the risk of disputes, data loss, or breaches of applicable data protection legislation increases. Data sharing arrangements should be reviewed carefully to understand what data flows between the two businesses. Further, the aspects of personal data and GDPR should not be forgotten – when and what kind of data is shared plays a key role.

Software licences and technology agreements deserve particular attention, as many are non-transferable or contain change-of-control provisions that could be triggered by the transaction. Their licence terms may also limit the provision of transitional services — something worth flagging early in due diligence. Equally important is identifying key technology personnel within the target business and assessing the risk of losing them at an early stage after the investment.

Shadow technology, meaning the undocumented tools and workarounds that employees rely on daily, is another frequent blind spot. Many of these issues share a common root cause: insufficient involvement of IT and legal teams in the deal process from an early stage. By bringing technology leadership and legal advisers into the conversation during due diligence, parties can identify dependencies, assess contractual and regulatory risks, and build a separation plan that reflects operational and legal reality rather than assumptions.

Knowledge transfer is an aspect that cannot be emphasised enough — it is not merely an administrative task but a key factor in deal success. A significant amount of know-how, especially silent knowledge, risks being lost if this workstream is not prioritised. The risk increases when key personnel are shared with the seller group and do not transfer with the business. Once the transition period ends, extracting knowledge from the seller becomes a matter of goodwill rather than obligation, so knowledge transfer sessions should be scheduled and contractually embedded during the transition phase.

Buyers who invest time and resource in understanding the technology landscape, mapping data flows, and securing knowledge transfer obligations during the transaction will be far better positioned to realise the value of the investment — and to avoid the disputes, delays, and unexpected costs that so often follow those who do not.

Transitional services agreement is an efficient separation tool that keeps the business up and running

A transitional services agreement (TSA) is one of the most important tools in a carve-out transaction. Its purpose is straightforward: to ensure that the carved-out business can continue to operate while the buyer builds or migrates to its own standalone systems and infrastructure.

However, a well-drafted TSA does far more than simply maintain the status quo. It should include mechanisms that allow the parties to adjust the arrangement as integration progresses and the buyer’s understanding of the business deepens. Both parties should commit adequate, well-resourced integration teams. The TSA should support this with clearly defined governance and escalation provisions, including designated service managers, and regular steering committee reviews, while still allowing both parties to request agile adjustments through a formal change order process as the separation progresses.

The scope of services should be clearly outlined from the outset, but the TSA must remain adaptable if any essential business services are later found missing from the scope. The buyer’s right to terminate individual services upon notice once standalone capability has been achieved must be taken into account in the termination provisions. The seller, on the other hand, wants to avoid any stranded costs caused by early termination of transitional services such as licence costs.

Data migration timelines and responsibility allocation should be addressed explicitly within the TSA itself, rather than left to be negotiated informally after closing. The TSA should also include robust step-down schedules and clearly defined exit milestones. A good tool for milestones and agreeing on the details of the separation is to include a separation plan as part of the TSA.

In short, the TSA should be treated not as a boilerplate schedule, but as a strategic document and a roadmap that directly supports the buyer’s integration plan.

Key takeaways: from due diligence to day one and beyond

Timing and careful planning are key for successful carve-outs. Buyers who embed integration planning into due diligence — mapping technology dependencies, identifying contractual constraints such as non-transferable licences and change-of-control provisions, and addressing regulatory requirements before closing — are far better positioned to realise the full value of their investment.

A successful carve-out is not defined solely by the terms agreed at signing — it is measured by the buyer’s ability and experience to build a fully independent business within the planned timeline and budget. This requires integration planning to begin during the preparatory phase of the process.

Technology systems and data flows must be mapped early, contractual constraints such as non-transferable licences and change-of-control provisions must be identified and addressed, and regulatory obligations must be built into the migration plan from the outset.

Equally, the retention and incentivisation of key personnel of the target business should be addressed early in the process, as their knowledge and continued engagement are critical for the success of the business. A well-structured transitional services agreement, with clearly defined service scopes, step-down schedules, exit milestones, and robust governance mechanisms, provides the contractual backbone that keeps the business running while standalone capability is built.

Carve-outs reward those who plan early, resource properly, and align their internal and external technology, legal, and operational teams from the outset.

With strategic focus and disciplined execution from day one, the investment made before signing becomes the foundation for returns long after closing.