Draw the perimeter first
A group decides to sell its industrial sensors business. Someone filters the ledger to the sensors segment, exports the rows and calls it the carve-out. But the sales team sells sensors and consumer devices on the same calls. One factory makes components for both. The parent owns the brand and runs the bank accounts. The export is tidy, and it is wrong.
A carve-out separates a business from a larger group for reporting, a sale, a spin-off or another transaction. The business being separated rarely matches a legal entity or a reported segment. So the first job is the perimeter: which products, customers, contracts, employees, assets, liabilities, locations and activities go with it. This is a Scorecard (income statement) unit, and its reflex is the bridge: from the parent's records to a set of numbers that describes only what sits inside the line.
- Holds the factory that serves both businesses
- Bank accounts and brand sit with the parent
- Some sensor staff are employed elsewhere in the group
- Sensor revenue as management reports it
- Costs already allocated by the parent's keys
- No balance sheet of its own
- The contracts, people, equipment and rights in the deal
- Shared items split on a stated basis
- Reconciled back to the parent's books
Map what the business uses
Start with what is directly attributable: the sensor contracts, the sensor plant equipment, the 220 people who work only on sensors. Split shared items on a basis you can defend, in writing: the joint sales team by time or by revenue, the shared factory by units or by machine hours. Reconcile the carved activity back to the parent's records, so that sensors plus everything else still adds up to the group.
- 1Define the perimeterProducts, customers, contracts, people, assets, obligations, sites
- 2Identify directly attributable itemsContracts, equipment and staff that belong only to sensors
- 3Split shared items on a stated basisRevenue, headcount, usage or transactions, with the reason
- 4Reconcile to the parent's recordsSensors plus the rest equals the group
- 5Disclose the assumptionsSo a reader can challenge the keys
Cash, debt and tax do not follow revenue. The parent's treasury sweeps every account nightly, the debt was raised at group level, and one tax return covers the whole group. Allocating them by revenue share is a guess dressed as a method. Each needs its own fact-based treatment, and where the facts are missing, the gap is a diligence question rather than a plug.
Internal deals become external ones
Intercompany transactions need care. A historical transfer price is not a future third-party price: the factory sold components to sensors at an internal rate, and an outside supplier will quote its own. The brand is the parent's, so leaving means negotiating a license at a price the history does not contain. Show the historical record and the post-separation arrangement as two layers. Blend them and nobody can tell what was observed from what was assumed.
The sensors business is a reported segment and also a legal entity. Which statement about its carve-out perimeter is correct?