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IT Carve-Out – What is it?

I have been blogging on IT carve-outs and their importance so far. So here comes a first Definition of what it actually is.

Within the context of mergers and acquisitions, the term divestment or divestiture refers to a particular form of a demerger, which results in generating liquid assets. A demerger is defined as the act of separating an organization into two or more stand alone assets (Cascorbi 2003). According to Cascorbi, the major characteristic of a demerger is the disintegration of an organization, where the term disintegration functions as a generic term that covers all legal, business, process and organizational related activities of a demerger. Disintegration can be considered as the counterpart of the term integration during an M&A transaction.

While the term demerger hits the core of the concept – namely disintegration – and is commonly used in practice, it is problematic as it implies a preceding merger. The term carve-out is basically used as synonym, which appears to be less restrictive. Broyd and Storch (2006) and Buchta et al. (2009) define a carve-out as the operational activities needed to conduct a divestment, in which the carve-out object is established either as a stand-alone organization or merged with another organization.

A carve-out typically includes the actions required to de-integrate the IT systems of the carve-out object from its parent organization. In this vein, Leimeister et al. (2008) define the IT carve-out process to include the separation of all shared information and communication technology related activities.

To conclude, I typically use the term divestment or divestiture to refer to the financial or corporate strategic aspects of separating a business unit from its parent organization. The term carve-out covers all operational activities needed to implement a divestment. Finally, the term IT carve-out refers to the activities needed to separate a carve-out object’s IT assets from its parent.

Perspectives on Corporate Transitions

Perspectives on corporate transitions.png

In the figure above, I try to illustrates the different perspectives of the buyer and seller to clarify the different terms. The seller takes the strategic decision to divest a business unit. This leads to a carve-out project separating the business unit from its parent’s organizational structure. Sub-projects are responsible for different functions including legal, financial, tax, human resource, production and IT issues (Leimeister et al., 2008). The result of the carve-out project is an independent viable unit that can either be integrated into another organization or operate as an independent, standalone organization (Broyd and Storch, 2006; Müller, 2006; Buchta et al., 2010). In the former case, the buyer manages a post-merger integration (PMI) project to realize synergies by integrating the business unit into the new parent organization (see, for example, Wijnhoven et al., 2006; Mehta and Hirschheim, 2007; Henningsson and Yetton, 2011).


Broyd, R. and B. Storch (2006) Carve to measure. In: Handbuch mergers & acquisitions management, B. W. Wirtz, (Ed.). Gabler, Wiesbaden: pp: 1223-1237.

Buchta, D., M. Eul and H. Schulte-Croonenberg (2009) Strategisches it-management: Wert steigern, leistung steuern, kosten senken. 3 Edn., Wiesbaden: Gabler Verlag.

Cascorbi, A. (2003) Demerger-management. Wiesbaden, Germany: Gabler.

Henningsson, S. and P. Yetton (2011). Managing the it integration of acquisitions by multi-business organizations. pp: Paper 7.

Leimeister, S., J.M. Leimeister, J. Fähling and H. Krcmar (2008). Exploring success factors for it carve out projects.

Mehta, M. and R. Hirschheim (2007) Strategic alignment in mergers and acquisitions: Theorizing is integration decision making. Journal of the Association for Information Systems (JAIS), 8(3): 143-174.

Müller, H. (2006) Einführung zum mergers & acquisitions management. In: Handbuch mergers & acquisitions management, B. W. Wirtz, (Ed.). Gabler, Wiesbaden: pp: 1187-1207.

Wijnhoven, F., T. Spil, R. Stegwee and R.T.A. Fa (2006) Post-merger it integration strategies: An it alignment perspective. The Journal of Strategic Information Systems, 15(1): 5-28.

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      Author's profile photo Former Member
      Former Member

      Great overview Markus. I would like to make the SAP Community aware of an upcoming webinar on this topic: "SAP Carve-outs: Automated." It is sponsored by SNP (

      May 24 @ 2PM EDT - If you can't make it or see this post after the webinar date, you can still view on the on-demand version at this link.

      You can register for the webinar here:

      A quick abstract of the webinar:

      SAP Carve-outs, dilutions and divestitures are incredibly complex transformations. So many choices must be made and the time-line is always compressed. Critical information needed to run the business must be supplied to the buyer while at the same time protecting sensitive information from a potential competitor. Each one of these decisions has far-reaching impact from preservation of history, master data relevance and compliance. The solution is simple: Automate.

      In this webinar you'll discover how to leverage pre-defined transformation content that eliminates man-years of effort and risk in your SAP carve-out project. Yes, the tedious processes of complex carve-outs can be automated for fast, secure results, with the added benefit of automated audit trails.