The Post-Close Reality Check

When you’re executing a carve-out, the “deal done” moment is just the beginning. The real work starts when the newly independent company must execute — not just survive. Studies show that about one-third of carve-out deals fail to deliver the expected value because operational separation was undervalued or poorly executed.

In other words: Strategy without operational integrity is a promise unkept.

For leading private equity sponsors, when you go in as new owner, your thesis often rests on owning an “unloved” business, freeing it from the parent’s bureaucracy, and unlocking margin and growth. But you can’t scale what you haven’t structurally separated. Designing and standing up the systems for independency — finance, HR, vendor controls, IT — is what turns that thesis into value.

Designing Scalable Independence: The Systems You Must Stand Up

Here’s a practical breakdown of three core systems you must execute early, along with hands-on execution guidance.

1. Finance & Reporting Architecture

Why it matters: You must generate clean, audited financials from Day 1; you must report meaningfully to the LPs and the board; you must have visibility into cost structure, working capital, stranded costs, and savings. According to a recent report, many carve-outs overrun separation cost envelopes or fail to estimate “stand‐alone” costs accurately. FTI Consulting

Hands-on execution steps:

• Stand up the financial ledger and financial reporting system (e.g., IBM Cognos TM1 or equivalent) keyed to the new entity’s legal structure.

• Identify and allocate stranded/allocated costs from the parent (for example, services previously shared).

• Build deal-basis (“carve-out”) P&L and balance sheet models that reflect the new business’s independent operations. CrossCountry Consulting

• Establish monthly close cycles, key operating metrics (KPIs), and an early dashboard to monitor cost leakage, TSA exposure, and vendor dependencies.

  Operator tip: Prioritize simplicity in the first 90-120 days — get the books clean, get the close cycle working, then layer complexity. A shaky financial engine can undermine everything else.

2. HRIS and Talent Infrastructure

Why it matters: People are the lifeblood of the business, and payroll/benefits disruption or attrition of key talent can derail the value creation plan. One practitioner noted: “You are building a company almost from the ground up” when executing a carve-out. Aspen HR

Hands-on execution steps:

• Choose or bring in the core HR infrastructure (for example, ADP Workforce Now or similar) and finalize payroll, tax, benefits, and HRIS setup well in advance of Day 1.

• Map leadership roles and decision rights in the new business — you’ll likely need at least one of the top 3 executives to bring standalone operational experience. Goldman Sachs Asset Management

• Conduct talent retention mapping for those key to business continuity (sales, service, operations).

• Communicate employee value proposition early to avoid attrition and culture drift.

  Operator tip: Yes, systems matter — but also culture. Early clarity on purpose, vision, and operating model matters. Combine the HRIS tech with a real-life document that says “This is how we operate now.”

3. Vendor & Shared-Services Controls (TSA Risk Management)

Why it matters: Many carve-outs stumble because of heavy reliance on transition service agreements (TSAs) from the parent or legacy shared services — creating dependencies, cost overruns, or delays in full independence. E78 Partners

Hands-on execution steps:

• Create a vendor inventory: all contracts, service levels, legacy shared functions (IT, facilities, HR, finance) that must be decoupled or managed under a TSA.

• Negotiate TSAs with defined exit milestones, service levels, cost tracking, and gating mechanisms to avoid open-ended burdens. Lippes Mathias

• If possible, align the IT architecture and vendor relationships to enable a “zero TSA” scenario for critical systems, accelerating true independence and simplifying future run-rate operations. Alvarez & Marsal

• Set up vendor governance rhythm: weekly reviews, issue logs, escalation paths, and risk dashboards.

  Operator tip: Treat vendor/legacy shared service disentanglement as mission-critical. It’s not a side project — it’s the plumbing of independence.

Governance and Reporting to PE Partners

For a PE-backed carve-out, governance is not optional. The faster you clean up decision rights, reporting cadence and oversight, the faster you move from “Day 1 hit the ground running” to “Day-to-run rate hitting target”.

Here’s what matters:

• Decision rights matrix: who makes what decisions (finance, IT, HR, ops), especially in early phases.

• Operating committee cadence: e.g., weekly leadership team, bi-weekly investor board, monthly full P&L review.

• Measurement framework: Include stand-alone cost savings, margin improvement targets, TSA exit metrics, HR retention metrics, vendor risk metrics.

• Communication rhythm: As EY outlines, “a kickoff with buyer to align on guiding principles, Day 1 strategy and governance model” is one of the five critical steps. EY

  Bottom-line: Investors and operators need real-time visibility, not monthly surprises.

Execution Architecture: From Blueprint to Build

Strategy without execution is vanity. Here’s a high-velocity execution framework tailored to carve-out universes:

1. 100-Day Blueprint: Immediately post-close, execute a 100-day plan focusing on “stabilize operations” (close cycle, payroll, vendor governance) and “prepare for run-rate” (reporting, stand-alone systems, leadership alignment).

2. Capability Squads: Form cross-functional pods (finance reporting, HRIS and benefits, vendor controls/IT separation) each with a dedicated lead, charter, and dashboard.

3. TSA Exit Tracker: Maintain a visual board of TSAs with owner, service, SLA, cost, exit milestone. Obvious visibility drives accountability.

4. Retrospective Rhythm: Weekly “execution huddle” where pods update status, surface risks, and escalate blockers. Slide that into governance committees so escalation is real-time.

5. Run-Rate Shift: By Day 120-180 aim to shift focus from “stand-up” mode to “optimize and scale” mode — fewer fire-fights, more discipline in margin capture and growth execution.

   This kind of architecture converts operational “disentanglement fire-drills” into stable infrastructure for growth.

Strategy Without Integrity Fails

You already know the theory: carve-outs unlock value. But as research from McKinsey & Company shows, operational risk is often underpriced and under-managed — eroding value. McKinsey & Company

It’s not enough to buy an asset, apply a thesis, and hope the systems will magically align. You need:

• A clear value creation plan aligned with a separation roadmap.

• Focused execution on the plumbing of independence.

• Discipline in measurement and governance from Day 1.

When those elements align, you don’t just close a deal — you build a better, independent business that can scale and deliver on your PE thesis.

Conclusion

On deal-day you gain control of the asset. Ten weeks later you must prove you can operate it independently, ten months later you must show you can scale it. Those who succeed don’t rely on cost cuts and reactionary defensiveness — they design architecture.

Because you can’t scale what you haven’t structurally separated.

References

• McKinsey & Company — Operations: The Alpha Factor in Private Equity Carve-Out Deals

• Bain & Company — Carve-Outs Open Up Value in a Tight Deal Market

• EY — Carve-Out Sale Road Map: Sign to Close

• Alvarez & Marsal — Organisational Stand-Up in Carve-Outs

• Aspen HR — HR Best Practices That Can Make or Break Your Next Carve-Out