Striking out: How to unlock the full potential of corporate carve-outs

Lizzie Meadowcroft, VCP Director based in LDC’s Manchester office, explores the complexities of corporate carve-outs and how private equity can help management teams to navigate them. In her role within LDC’s Value Creation Partners team, Lizzie works with portfolio company management teams to deliver operational improvement, integration and carve out projects.  

Corporate carve-outs continue to be a popular feature of the UK’s M&A landscape. In the North West, we’ve seen plenty of successful carve-outs across a wide range of sectors in recent years, from telecoms businesses to healthcare, manufacturing and food and drink.

They occur when a business decides to sell or spin off a non-core asset; a division that no longer aligns with its strategy. The process can allow the company to sharpen its focus, free up capital to deploy elsewhere and streamline operations.

There are multiple perspectives to a carve out, but for a divisional management team it can present an exciting opportunity. Through a private equity partnership, they can own the business they run, gain autonomy and secure investment to pursue their own growth ambitions unencumbered.

But successful execution is not always straightforward, and management teams should seek the right support to navigate complexities and ensure the business is set up for sustainable, long-term growth.

How to approach a carve-out

Private equity investors can provide not only capital but also hands-on expertise to help the newly carved out business become a standalone entity.

To manage this, the process requires a detailed separation plan that maps out everything from operational dependencies to people considerations. There will be a long list of separation activities, such as novating customer and supplier contracts, putting in place standalone IT and payroll solutions and developing the new organisation structure, which need to be addressed in order to ensure the business can continue to operate seamlessly post carve-out. Our experienced team of Value Creation Partners can provide hands-on support, working in partnership with management teams to develop the business’s strategy, enable a smooth transition and ensure it is set up for success from day one.

LDC has a strong track record of delivering successful carve outs and helping previously unloved businesses to thrive, by providing strategic input and ongoing investment to support growth.

And our unique funding model – supported by Lloyds Banking Group – means our access to capital to support our portfolio companies’ growth ambitions is evergreen.

Carve-outs in the North West

In February 2025, our North West team led the exit of LDC’s investment in HSL Compliance, a leading provider of environmental compliance services, which is a true carve-out success story.

LDC first invested £20m to back the carve-out of SGI Holdings Ltd (SGI Holdings) from its parent group Kiwa in 2019. This complex transaction included the simultaneous management of 10 discrete carve out workstreams spanning IT, Finance, Sales and Marketing, HR, Customers, Suppliers and Legal over. With meticulous planning and experience in this area, we were able to ensure operational continuity over a 12-month period, while establishing independent systems and processes. SGI Holdings comprised SGI Compliance and HSL Compliance. In August 2023, SGI Holdings sold its European operations, SGI Compliance which were deemed to be non-core to CERTANIA. HSL Compliance remained separate from this transaction.

With LDC’s support and follow-on funding, a successful six-year partnership saw HSL’s management team deliver on an ambitious growth plan, undertake a strategy reset to focus on the UK water markets, and complete 11 bolt-on acquisitions, significantly increasing the breadth of its UK coverage, client base and capabilities.

In that time, the business quadrupled revenues to £77m and doubled headcount to 650, establishing itself as a high-quality business with a national footprint of 19 offices across the UK and Ireland.

Now, following fresh investment from IK Partners and reinvestment from LDC, the business is set for continued growth.

A collaborative effort

Carve-outs can be a catalyst for long-term growth and success. With the right support, management teams striking out can gain the autonomy to shape their own growth plans, but also the ability to create jobs and positively impact the communities they operate in.

Alongside the support of investors, successful carve-outs rely on a strong advisory network, and the North West is home to a highly experienced community of advisers, lawyers and corporate finance experts that play a crucial role in supporting their completion.

Our on-the-ground investment and value creation teams mean we can work with regional advisor teams to secure the best outcomes for the businesses they advise and support. The strength of these relationships has supported our track record of backing ambitious management teams through complex transactions.

Find out more about how we work with ambitious management teams or contact our North West team here.