By Simon Wells, for Forbes Business Council.
View the article on Forbes.
In the world of corporate carve-outs, technology separation is often the most complex workstream to execute. Getting it wrong can cost businesses millions in additional unplanned service extensions, transitional service agreement (TSA) penalties and remediation costs. Beyond the financial impact, the reputational damage to the newly acquired entity can affect customer confidence, employee retention and ultimately compromise the long-term value of the investment.
This is especially true for private equity buyers, who typically lack existing infrastructure into which the carved-out business can integrate. Instead, they must set up a full suite of IT services from scratch while ensuring day-to-day operations go uninterrupted. In a carve-out situation, technology is often centralized as part of a wider shared services function within the former parent company. This poses a challenge for the buyer as a new operating model must be created that reflects the organization in its future separated state. But the acquired businesses often lack the infrastructure, skill set or capacity to design and manage this transformation effectively. That’s where t he right technology partner becomes indispensable.
I would argue that success hinges not just on technical expertise, but on finding an IT managed service provider (MSP) that offers commercial flexibility, innovation and service excellence, along with a proven track record in M&A execution. In today’s environment, getting the technology separation right the first time isn’t just desirable—it’s essential.
For private equity firms, choosing the right MSP for their portfolio businesses is not a tactical decision, it’s a strategic one. And there are several key criteria that can make the difference.
Experience With M&A And Complex Transactions
While it may seem obvious, not all IT providers possess the capabilities to handle the unique complexities of M&A—particularly corporate carve-outs. These transactions require a technology partner who understands the critical sequencing of data integrations and migrations, the disentanglement of shared systems and the operational impact of change throughout the separation process.
An MSP with carve-out experience offers more than just technical expertise; they bring the strategic foresight and procedural discipline needed to anticipate risks, compress timelines and navigate common pitfalls. Crucially, they must be able to lead discussions with the seller and coordinate across stakeholders to ensure a smooth and successful transition.
Speed Of Mobilization And Commercial Flexibility
Carve-outs are inherently time-sensitive, often constrained by tight budgets and long lead-time dependencies. The separation team must move at speed to avoid delays leading to additional services fees and penalties from the seller.
Finding an MSP with the ability to mobilize swiftly and support critical activities, even while onboarding processes are still underway, can save valuable time in the early stages of the separation process. In many cases, core systems and procurement processes are not yet fully operational or are at the mercy of the former parent company, making traditional supplier onboarding a challenge. An MSP with prior experience of working within this dynamic understands this reality and is prepared to take early action, helping to drive progress from day one and keep the separation on track.
Choosing A Partner, Not Just A Provider
Given the critical role technology plays in business and the reliance on external expertise during a carve-out, a portfolio company needs more than a transactional vendor. It needs a true partner. One that is as invested in the success of the separation as the deal team itself.
A partner-first MSP offers more than just good service delivery. They help shape strategic decisions and proactively manage risk. They add value by challenging assumptions, advising on best practices and bringing specialist insight to navigate an ever-evolving technology landscape, freeing the business to focus on core operations.
This type of MSP aligns its success metrics with the business, works flexibly across shifting priorities and often steps beyond the traditional scope to keep momentum during the separation. It’s a relationship that not only enables a smoother transition into a stand-alone state but also lays the groundwork for long-term value creation after completion.
Aligned Incentives And Shared Risk
Establishing clear expectations from the outset and making your selection contingent on the MSP’s commitment to meeting TSA timelines is essential. Service credits and liquidated damages for failure to deliver to target should be incorporated into contracts to add a layer of protection for the business while aligning incentives with the MSP. This ensures both parties share the risk and are equally motivated to deliver on time.
When both parties share risk, commercially and operationally, the partnership becomes more accountable and responsive. That’s why it’s vital to engage an MSP that offers “skin in the game” through milestone-based or risk-sharing billing models. Such alignment keeps the separation on track and successful.
Location And Coverage
Carve-outs often span multiple sites, regions or even continents. An MSP with wide geographical coverage as well as a strong local presence can make a significant difference in the quality of execution.
Whether it’s physically supporting office transitions, managing local compliance issues or providing 24/7 multilingual support, having an MSP with the correct geographic reach ensures minimal disruption and maximum responsiveness, especially during the critical separation and stabilization phases.
Excelling In Both Separation And Long-Term Support
A great MSP doesn’t just shine during the separation phase; they provide first class aftercare and a seamless transition into long-term IT support. It is important that the chosen MSP is able to demonstrate proven methodologies for “go-live” from day one, and offers strategic guidance and service continuity post-transaction. Having this continuity of knowledge, systems and relationships can dramatically reduce risk and operational friction post separation. There is nothing worse than dealing with the “A team” during the separation, only for the reserves to step in once the service has transitioned.
Finding a partner with dual capability means you won’t need the distraction of switching providers once the carve-out is complete.