The Carve-Out Boom: What UK CEOs Must Get Right in 2026
UK CEOs must treat 2026 as the year portfolio simplification becomes a core strategic tool: KPMG has positioned 2026 as the “Year of the Carve-Out,” with separations moving to the centre of corporate strategy rather than sitting at its margins.
Carve-outs already made up nearly a third of all UK deals announced in 2024, and that momentum has continued to build. Reckitt’s £3.5 billion divestment of its Essential Home business to Advent International and Unilever’s demerger of its ice cream business into the standalone Magnum Ice Cream Company, valued at £7.8 billion, illustrate the scale involved. For CEOs, the strategic question is no longer whether to simplify the portfolio, but how to execute separation without destroying the value the deal is meant to unlock.
Why Are UK Companies Pursuing Carve-Outs Now?
Three pressures are converging: shareholder demand for capital discipline after several years of diversified conglomerate structures underperforming focused peers, private equity’s appetite for standalone assets it can operate more aggressively, and boards’ own recognition that certain business units compete for capital and management attention without earning it. According to KPMG, carve-outs are moving to the centre of portfolio strategy, with execution capability now emerging as a defining institutional advantage rather than a one-off project skill.
Executive Action:
- Review the portfolio annually against a clear capital-and-attention test: does each unit earn the resources it consumes?
- Build carve-out execution capability as a standing organisational competence, not a one-off deal team.
- Brief the board on which business units would be considered for separation under current market conditions.
How Much Private Equity Appetite Is There for Carve-Out Assets?
According to KPMG’s global M&A outlook, 71% of private equity dealmakers are actively pursuing or open to portfolio separation transactions, and 55% already have such deals under active consideration. That depth of buy-side interest changes the calculus for CEOs: a well-prepared carve-out today finds a genuinely competitive buyer pool, whereas a rushed or poorly separated unit risks being priced as a distressed asset rather than a clean standalone business.
Executive Action:
- Commission a standalone cost and capability assessment well before any formal sale process begins.
- Run a competitive process rather than a bilateral negotiation wherever separation readiness allows it.
What Makes Carve-Out Execution Succeed or Fail?
The most common failure mode is underestimating what “standalone” actually requires: shared services, IT systems, brand licensing and even basic finance functions are frequently entangled across the parent group in ways that take far longer to unwind than deal timetables assume. CEOs who treat separation planning as a legal and financial exercise, rather than an operational one, consistently see value leak out during the transition period through service disruptions, customer confusion and talent attrition.
Executive Action:
- Map every shared service, system and contract dependency before signing, not after.
- Appoint a dedicated separation management office with direct executive sponsorship.
- Use INFORMD’s technology strategy review template to assess system separation risk before deal signing.
How Should CEOs Communicate Carve-Out Strategy to Investors?
Institutional investors increasingly reward clarity of plan over scale of ambition. A carve-out narrative that leads with the strategic rationale — why this unit no longer fits, what it’s worth to a specialist owner, and what the parent will do with the proceeds — lands far better than one framed purely around simplification for its own sake. CEOs should also be prepared for activist investors to push separation faster or further than management’s own timetable, particularly where governance is already under scrutiny.
Executive Action:
- Lead investor communications with strategic rationale, not just deal mechanics.
- Prepare a response plan for activist pressure to accelerate or expand separation activity.
What Should the Board Approve Before a Carve-Out Proceeds?
Approving a major disposal or demerger sits squarely within board-level capital allocation authority under the UK Corporate Governance Code and, for larger transactions, the Takeover Code administered by the Panel on Takeovers and Mergers. The board’s role is to test management’s value case rigorously — including the standalone cost base, retained liabilities and transition risk — before authorising the process to proceed.
Executive Action:
- Require an independent challenge to management’s separation value case before board approval.
- Set explicit board checkpoints through the separation process rather than a single sign-off at launch.
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KPMG has positioned 2026 as the Year of the Carve-Out as portfolio separations move to the centre of corporate strategy. Carve-outs already made up nearly a third of all UK deals announced in 2024, and momentum has continued to build.
According to KPMG, 71% of private equity dealmakers are actively pursuing or open to portfolio separation transactions, and 55% already have such deals under active consideration.
Underestimating operational entanglement — shared services, IT systems, brand licensing and finance functions are often harder to separate than deal timetables assume, leading to value leakage through disruption and talent attrition.
The board approves major disposals and demergers under the UK Corporate Governance Code and, for larger transactions, the Takeover Code administered by the Panel on Takeovers and Mergers, after independently testing management’s value case.
