Sell-side counsel for corporate separations: drawing the perimeter, untangling the shared functions, and structuring the exit so the business you keep stays whole and the business you sell can stand on its own.
A business that has lived inside a group has no contracts in its own name, no systems of its own and no payroll it runs itself. Selling it means drawing a perimeter through assets that were never meant to come apart, and the first thing a buyer's counsel reads is the schedule saying which side of the line each contract, employee and license falls on.
The perimeter is drawn before the teaser goes out, while the choices are still the seller's. The ancillaries carry the weight: a transition services agreement with a scope, a price and an exit date for each service, and a wrong-pockets clause that moves any asset found in the wrong entity after closing for no further consideration.
A spinoff has no buyer. The parent distributes the business to its own shareholders, and the economics turn on whether the distribution is tax-free under Section 355, which an acquisition of half or more of either company within two years can undo at the parent level under Section 355(e). We plan the separation around the seller's objective and run it from step plan to last TSA termination.
Defining what the divested business is, meaning the assets, contracts, employees, IP, and liabilities that travel with it and those that stay behind, so the unit can be sold or spun off as a coherent whole.
Structuring the sale of a business unit that has never stood alone, including asset versus equity deals, pre-sale internal reorganizations, and the legal-entity steps that make a clean perimeter possible.
Scoping, pricing, and exit-dating the TSAs that keep IT, payroll, accounting, and procurement running for the separated business after closing, for long enough to stand it up but not so long that the seller stays tethered.
Identifying the shared infrastructure and fixed costs the seller is left carrying once a unit departs, so the true value of the transaction and the health of the remaining company are clear before terms are set.
Structuring spinoffs and other shareholder distributions, coordinating with tax counsel on the requirements for a tax-deferred separation and the governance of the newly independent company.
Untangling shared agreements, obtaining third-party and regulatory consents, and documenting the purchase, separation, and ancillary agreements that carry a divestiture from signing to closing.
A parent-level master agreement does not travel with the unit unless the counterparty agrees to a partial assignment, and most anti-assignment clauses forbid one. The perimeter schedule says, for each shared contract, whether it is consented, replicated or bridged under the TSA; each answer is a closing condition or a service line.
Carve-out financial statements rarely exist on day one. The unit's revenue was consolidated and its overhead allocated, and auditing standalone statements takes months; a public buyer may need them audited under Regulation S-X to file after closing. The seller's finance team starts before the bankers do, or the timetable starts without it.
A TSA bridges the gap until the buyer stands on its own, but one that runs too long or too cheaply keeps the seller bound to a business it has sold. Scope, price, and exit dates deserve a negotiation of their own.
The overhead a divested unit used to help absorb does not leave with it. Identifying those costs early protects the value of the deal and the cost base of the company that remains.
A spinoff that fails Section 355 is taxed twice, as a dividend to shareholders and as a sale by the parent. Spins proceed on a tax opinion, a ruling or both, and the facts behind them come from the step plan, so the analysis leads the plan rather than blessing it.
Employees do not travel with a business by default. In a US asset carve-out each receives an offer, the agreement fixes how comparable pay and benefits must stay after closing, and the seller's retirement plan spins off the accounts or distributes them. Each is a schedule the buyer reads first.
Before anyone sees a teaser, the unit is defined on paper, with every contract, employee, license, system, and lawsuit sorted into travels-with or stays-behind. Ambiguity found here costs an argument, and ambiguity found at signing can cost the deal.
An internal reorganization sequences the entities into sellable shape: assets dropped into a new subsidiary, shared IP licensed across the line, group financing unwound. Each step is ordered so the tax analysis, which is decisive in a spinoff under Section 355, survives the whole chain.
The purchase or separation agreement is negotiated alongside its ancillaries, with TSAs scoped and exit-dated, third-party and regulatory consents chased, and employee transfers documented, because in a carve-out the ancillary agreements are the deal.
Closing starts a clock rather than ending the work. The business runs on the seller's systems under the TSA while it builds its own, and we manage the service schedules, migration milestones, and termination dates until the last tether is cut, while the seller's remaining company is measured against the stranded-cost plan.
A carve-out is judged twice, by what the buyer receives and by what the seller is left holding.
A carve-out is the sale of a business that has never been a company: a division, a product line or a set of plants that lived inside a larger group and shared its contracts, people and systems. The seller first draws a perimeter, deciding what travels and what stays, then reorganizes so the business can be delivered as a legal entity or a defined asset package. What distinguishes it from the sale of a standalone subsidiary is the work a subsidiary has already done: standalone financial statements, contracts in its own name and employees on its own payroll.
A divestiture is a sale of a business to a third-party buyer for cash or other consideration. A spinoff distributes the shares of a separated business to the parent's existing shareholders, creating an independent company without a sale. The two routes raise different questions. A divestiture turns on deal terms and buyer diligence, while a spinoff turns on the tax treatment of the distribution and the governance of the new entity, so the right structure depends on the seller's objective for the business and its capital.
Because the business has to be built before it can be sold. Standalone financial statements have to be prepared and often audited, shared contracts need consents or replacements, and the group's IT and payroll have to be separated or bridged under a transition services agreement. Each of those runs on a third party's timetable, the auditor's or the counterparty's, and none of them starts until the perimeter is fixed. Sellers who begin the separation before launching the sale process recover that time; those who begin at signing hand it to the buyer as a price negotiation.
A transition services agreement, or TSA, is the contract under which the seller keeps running defined functions for the divested business after closing, typically IT, payroll and accounting, until the buyer has stood up its own. Each service is described in a schedule with a monthly charge, a term and an exit date, and the standard of service is usually what the seller provided in the year before closing. The buyer wants the right to end services early on notice; the seller wants a fixed outside date and limited liability. A TSA without a migration plan behind it tends to be extended, and the seller stays tied to a business it has already been paid for.
Stranded costs, also called dis-synergies, are the overhead the seller is left carrying after a business is sold: the shared infrastructure, support staff, and fixed costs that the divested unit used to help absorb. Identifying them early matters because they affect the true value of the transaction and the seller's cost base afterward, and addressing them is part of structuring a separation that leaves the remaining company healthy rather than hollowed out.
By meeting Section 355 from the first step. The parent must hold control of the spun company going in and give it up coming out. The spun business must have been actively conducted for five years, the transaction cannot be a device for distributing earnings, and there must be a real corporate business purpose. The parent can retain debt relief or cash from the spun company within the limits of Section 361, which is why SpinCo's capital structure is a tax question before it is a financing question. Most spins proceed on a tax opinion and often a private letter ruling, and we have represented clients in matters before the IRS where the agency's view had to be addressed directly.
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Explore →Reviewed by Jonathan D. Herpy, Sr., Senior Partner · Last updated October 2026 · Educational overview · Not legal advice
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