Corporate Divestitures, Carve-Out Accounting & Spin-Off Valuation
Corporate Carve-Out Standalone Cost & Stranded Overhead Formula
Calculate Divisional Carve-Out GAAP EBITDA (Direct EBITDA - Allocated Parent Corporate Cost), Standalone G&A Cost Delta (Dis-Synergies vs Cost Savings), True Standalone Run-Rate EBITDA, and RemainCo Unabsorbed Stranded Overhead.
Replace arbitrary parent corporate allocations with bottom-up Standalone Cost models!
When a conglomerate divests or spins off a business unit, historical carve-out financial statements deduct an arbitrary revenue-based Parent Corporate Cost Allocation that almost NEVER equals what the division will spend as an independent company (SpinCo / NewCo)! Building a Standalone Cost model replaces Historical_Parent_Allocation with Bottom-Up Standalone G&A (dedicated CFO/audit/IT/HR/insurance/ERP licenses), revealing Standalone Cost Delta = Historical_Allocated_Overhead - True_Standalone_G&A (negative = standalone dis-synergy!). Meanwhile, on the seller’s side, parent RemainCo rarely sheds 100% of previously allocated shared-service headcount on Day 1, leaving RemainCo Stranded Overhead = MAX(0, Historical_Allocated_Overhead - Eliminated_Parent_Shared_Costs) until Transition Services Agreements (TSAs) roll off!
Verify on an Industrial Division Carve-Out—Divisional_Direct_Contribution_EBITDA = $55.00M (B2), Historical_Allocated_Parent_Overhead = $12.00M (B3 -> Carve-Out Audit EBITDA = 55 - 12 = $43.00M in E2), BottomUp_Standalone_NewCo_G&A = $16.50M (B4 -> Standalone Dis-Synergy Delta = 12.00 - 16.50 = -$4.50M in E3), and Parent_Immediately_Eliminated_Costs = $8.00M (B5): True Standalone NewCo Run-Rate EBITDA is 55.00 - 16.50 = $38.50M (E4), while Seller RemainCo is left absorbing MAX(0, 12.00 - 8.00) = $4.00M/yr of Stranded Overhead (E5)!
| Carve-Out & RemainCo Metric ($55M Direct, $12M Alloc, $16.5M Standalone, $8M Cut) | Formula | Verified Output |
|---|---|---|
| Carve-Out Historical EBITDA ($M) | Direct_EBITDA - Allocated_Parent_Cost | $43.00M |
| Standalone Cost Delta ($M) | Allocated_Parent_Cost - Standalone_GA | -$4.50M (+$2.00M @ $10M Lean GA) |
| Standalone Run-Rate EBITDA ($M) | Direct_EBITDA - BottomUp_Standalone_GA | $38.50M ($45.00M @ $10M Lean GA) |
| RemainCo Stranded Overhead ($M) | MAX(0, Allocated_Cost - Eliminated_Cost) | $4.00M/yr |
Bottom-Up Carve-Out Standalone Run-Rate EBITDA Formula
Validate Direct_EBITDA > 0, non-negative Allocated_Overhead, Standalone_GA (with Direct_EBITDA > Standalone_GA), and Eliminated_Cost!
=LET(dr_e, B2, al_p, B3, st_g, B4, el_c, B5, IF(OR(dr_e <= 0, al_p < 0, st_g < 0, el_c < 0, dr_e <= st_g), "Invalid Carve-Out Cost Model", ROUND(dr_e - st_g, 2)))Lean Private-Equity Standalone Footprint Check (Set Standalone G&A = $10.00M)
Model a lean private-equity NewCo structure where Bottom-Up Standalone G&A B4 = $10.00M (< $12.00M bloated parent allocation): Standalone Delta E3 turns positive (+$2.00M cost savings) and Standalone EBITDA E4 rises to $45.00M!
=IF(ISTEXT(E4), E4, ROUND(MAX(0, B3 - B5), 2))Try the example
Use the original values or change them to test your understanding.