A carve-out sells a division or product line rather than a standalone company, and everything that was shared must be divided.
Perimeter definition. Which entities, assets, contracts, employees, liabilities and intellectual property are included. Ambiguity here produces the majority of post-closing disputes, and a written perimeter document maintained from the outset is essential.
Carve-out financial statements. Prepared to show the business as if it had been standalone, with allocations of shared costs. Buyers should understand the allocation methodology, because the standalone cost base after closing is often higher than the allocation suggests.
Shared contracts. Agreements covering both the retained and the divested business must be assigned in part, replicated, or run through a transition arrangement. Counterparty consent is usually required.
Shared intellectual property. Ownership assigned to one side with a licence back, or co-ownership, which is generally worse. Trademark separation requires a transition licence with quality control and a rebranding deadline.
Employees. Identification of who transfers, and the treatment of shared services personnel.
Transition services in both directions, since the seller frequently needs services from the divested business as well.
Sufficiency of assets representation is the buyer’s principal protection against a perimeter that omits something the business needs.