3.8 Post-Carve-Out Transaction Agreements

Carve-out entities often enter into various post-transaction-related agreements with the former parent entity (e.g., tax-sharing agreements or transition-services agreements). After separation, these agreements may have a considerable impact on the carve-out entity’s financial results. The terms of any such agreements should be evaluated to determine whether substance differs from form (e.g., the substance of a transition-services agreement may be a distribution to the former parent as opposed to payments for transition services rendered).