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Financier Worldwide (FW) discusses strategy and execution for accelerating value in private equity carve-outs with Phil Dunne and Peter Rodrigues-Renon at Stax, a Grant Thornton company, and Gerard Nichol at Grant Thornton.
Phil Dunne is a Partner and leads Stax, a Grant Thornton company’s, private equity initiatives in the UK and EMEA. With over 25 years of experience spanning both industry and consulting within the private equity ecosystem, he is a respected thought leader and strategic partner. Prior to the joining the firm, he served as the UK managing partner at Roland Berger, advising private equity and corporate clients across the automotive, aerospace and industrial sectors.
FW: Could you provide a summary of the most significant trends and developments you have observed in private equity (PE) carve-outs over the past 12-18 months? How would you describe appetite and activity levels for this type of deal?
Dunne: The past 24 months have seen carve-out activity increasing and, as a structure, increasingly overlapping with private equity (PE) investment thematics. As a percentage of total M&A buyouts, carve-outs are increasing at around 10 percent per year, with an increasing concentration in the mid-market. Appetite is strong because these transactions offer proprietary, off-market deal flow, often at more balanced pricing than traditional auctions. A notable change I have seen is the dual role of carve-outs. Corporates continue to use them to streamline, and PE portfolios are also spinning out to release liquidity. With an increasing emphasis by PE on value creation these deals often present greater alpha opportunity than traditional buyouts. Industrial and energy carve-outs have dominated recent activity, but we are also seeing increasing momentum across technology, information services, and health. Carve-outs are no longer a niche category; they have become a mainstream deal type, offering entry, value creation and exit options for sponsors.
FW: In your experience, what are the most effective ways to accelerate value creation during the transition service agreement (TSA) period, without compromising operational stability?
Rodrigues-Renon: The transition service agreement (TSA) period is where I see many carve-outs begin to struggle. To accelerate value creation without destabilising operations, discipline is essential. I advise teams to follow four guiding principles: revenue, cost, risk and timing. Customer continuity must come first, since losing revenue momentum undermines the equity story immediately. It is also critical to structure the sale and purchase agreement and TSA so that the vendor retains financial incentives to support a smooth handover. Another success factor is capital planning. Separation costs should be calculated upfront and investment phased carefully, so the business and covenants are not stressed during a vulnerable period. Finally, dependencies between value creation levers and separation steps must be mapped. Growth initiatives that rely on tech platforms, systems or customer data access need realistic sequencing. If these fundamentals are handled well, the TSA period becomes not only a stabilisation window but also a launchpad for growth.
FW: How can PE sponsors ensure stability and momentum in the sales function during and after a carve-out, given that customer continuity and growth is the most critical driver of value growth?
Rodrigues-Renon: Sales continuity is often the single most important driver of value in a carve-out. Customers need to believe the newly independent business is stable, capable and committed. My first priority is signalling continuity: making sure account managers, contracts and service levels are preserved through the transition. My second priority is retaining key sales talent, so sponsors should design packages that reward both near-term retention and medium-term growth. Carve-outs also present an opportunity to sharpen the commercial proposition. Freed from legacy corporate constraints, the sales team can often pursue underserved customer segments, adjust pricing strategies or speed up decision making. Finally, communication matters – proactive outreach to customers explaining the benefits of independence builds trust and can even turn a potential churn risk into a source of momentum. In many successful carve-outs, stabilising and energising the salesforce has been the fastest route to preserving and growing enterprise value.
FW: How should vendors approach building a compelling equity story in carve-outs, particularly when the business has historically been positioned as a non-core asset within a larger group?
Nichol: When a business has been positioned as non-core, the vendor’s first task is to reframe the narrative. The equity story must shift from what the vendor did not sufficiently value or could not realise value from to what will be different for the business on a standalone basis or as part of a new trade acquirer’s group. That starts with articulating a new vision: how the asset becomes sharper, more focused and strategically relevant once independent or, where trade buyers are a likely acquirer, how being part of a different platform will unlock greater benefit. For businesses being divested by large groups, demonstrating that the carved-out business is freed from corporate constraints is critical, whether that is faster decision making, the ability to reinvest in growth or closer alignment with customer needs. In addition, demonstrating that there is a reinvigorated management team who can credibly sell the story and deliver this is key, and will be a focus for new investors. Vendors should also highlight how the business can capture opportunities that the current parent overlooked, for example through digital transformation, new channels or product innovation.
"When a business has been positioned as non-core, the vendor’s first task is to reframe the narrative."
-Gerard Nichol, Grant Thornton
FW: How should PE firms evaluate whether a carve-out is best positioned as a standalone platform versus a bolt-on to an existing portfolio company?
Nichol: The decision on whether to position a carve-out as a standalone platform or a bolt-on is about optionality and timing. A standalone platform preserves exit flexibility – it can be taken public, sold to a trade buyer or passed to another sponsor. However, it requires critical mass, a distinct equity story and sufficient independence to stand alone. Bolt-ons, by contrast, can deliver faster returns through synergy capture and multiple arbitrage, particularly when integrated into an existing portfolio. The trade-off is risk, if customer overlap, systems compatibility or cultural fit are weak, value can be diluted or destroyed. Increasingly, sponsors model both paths before committing, testing whether the equity story is stronger as standalone or as part of a platform. The right decision depends on hold period, customers perception and the appetite of prospective buyers at exit.
FW: How should PE firms approach synergy realisation and avoid integration pitfalls when acquiring carve-outs that are intended to bolt onto existing portfolio companies?
Rodrigues-Renon: When a carve-out is intended as a bolt-on, integration discipline is vital. I have witnessed the temptation to chase synergies immediately, but poorly sequenced activity can destabilise both businesses. The best approach is to set a phased integration roadmap anchored in customer continuity. Secure revenue first, then layer in revenue and cost synergies. Data and systems are often the biggest traps – rushing migrations without aligning on ownership, customer records, or regulatory needs creates real risk. Cultural integration is another pitfall, as leaders from the corporate parent may struggle in a PE environment, making communication and engagement critical. Finally, the capital intensity of the separation and integration should not be underestimated. Realistic budgets must be set for systems, branding and process harmonisation. When done well, synergies accelerate returns. When rushed, they can destroy the value originally underwritten. In bolt-on carve-outs, sequencing and planning are the real accelerators.
"When done well, synergies accelerate returns. When rushed, they can destroy the value originally underwritten. In bolt-on carve-outs, sequencing and planning are the real accelerators."
-Peter Rodrigues-Renon, Grant Thornton Stax
FW: In your view, what distinguishes a successful PE carve-out from a merely adequate one, in terms of stakeholder engagement, execution speed and long-term value creation?
Dunne: An adequate carve-out is one where there are no surprises and separation risks do not derail growth. A successful carve-out goes further – it accelerates into the growth plan from day one. Three factors stand out. First is stakeholder alignment. Management, employees, the seller and the sponsor all need to share a common vision and clear incentives. Second is execution speed. Successful carve-outs exit TSAs quickly while keeping the business stable. And third is strategic clarity. The value creation plan must be embedded in every decision, from IT investments to customer engagement. Where carve-outs fail, it is usually because execution and strategy become disconnected. The best outcomes materialise when every operational action reinforces the equity story. Success is measured not just by smooth separation, but by how quickly the business transitions from a former division to an independent, growth-ready market leader.
"An adequate carve-out is one where there are no surprises and separation risks do not derail growth. A successful carve-out goes further – it accelerates into the growth plan from day one."
-Phil Dunne, Grant Thornton Stax
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