THE PLAYGROUND

The standalone cost bridge

A division cannot leave its operating needs behind.

LIVE EXPERIMENT

The standalone cost bridge

Standalone recurring earnings140

Carved business revenue$500

1001000

Direct operating costs$300

0700

Parent shared-cost pool$120

0300

Historical allocation share25 %

0100

Standalone replacement costs$50

0200

Recurring lost-scale costs$10

0100

One-time separation cash costs$40

0150

Before you move a sliderWhy is adding back every corporate allocation usually too optimistic?

Standalone = 170 + 30 − 50 − 10 = 140

Historical allocated earnings170

Add back historical allocation30

Standalone recurring earnings140

Year-one after separation cost proxy100

READ THE MECHANISM

The parent pool is 120; allocating 30 to a division does not prove the parent can remove that cost. The buyer must replace shared capabilities. One-time separation cash needs and recurring standalone economics answer different questions.

Model assumptions & units

Hypothetical $m and an EBITDA-like cost scope with D&A, interest and tax excluded. Historical allocation is replaced by estimated standalone costs. The year-one proxy subtracts one-time costs but is not a GAAP income statement or complete cash flow forecast. Parent stranded costs require a separate removal plan.

The standalone cost bridge

The standalone cost bridge

Learn the thinking behind it