Matthew arrived at Warriors on a short-term deal in 2019 and has developed into one of the club's standout performers and a big favourite among supporters. His remarkable 2023/24 campaign saw him finish as the team's top try scorer with 14 as Glasgow secured the URC title, while he has racked up more than 50 tries overall - including a historic five-try haul in a single match in 2023.
The 32-year-old will now move on this summer after agreeing a three-year contract with Montauban. Carolan acknowledged that the offer represents greater long-term security for Matthews and his family.
Asked if Glasgow tried to keep Matthews, Carolan told Scotland Rugby News: "Look, there was an option for Johnny but it probably wasn't a long-term option. He's got a pretty good deal. And it's something that we wouldn't stand in his way. He's got to look after himself as well. And, you know, he's got a multi-year deal in France. Something that suits him and his young family.
"And it's where he is now in our pecking order over the last couple of, the last few months. Gregor Hiddleston has stepped up and, more recently, Seb Stephen has stepped up. And even looking behind that, you've Tavi Tuipulotu, you've got Joe Roberts in the academy, who's going to be poking his head into the senior squad next year as well.
"It's never nice to lose a player like Johnny - he's been brilliant for us - but as I said, it's just the evolution of a rugby team. And, you know, it's just great that we've got really good quality young guys coming through.
"And, look, we wish Johnny all the best. He's been brilliant for us over the last few years. But it wasn't so long ago that Johnny was that fringe player. We had Fraser Brown here and we had George Turner here. Then Johnny got his time as a frontrunner and it's now time for someone else to step up."
Matthews joins a number of experienced players set to depart ahead of next season, with Jack Dempsey, Huw Jones, Adam Hastings and Jamie Bhatti also moving on.
However, Carolan says the turnover is part of the natural cycle of a professional squad.
Asked if he held any concerns over Matthews' departure, Carolan replied: "No, I don't think so. I think when you see what's coming through, I think it's the cycle of professional rugby. I think you look over the last number of years, how we've recycled the squad as well. You know, Richie Gray has gone off to Japan, but Alex Samuel, who's 22-year-old, is now coming into his own.
"Max Williamson, Jare Oguntibeju, all these young lads are starting to come through. Ryan Wilson went, Fraser Brown went a couple of years ago, and now you've got Seb Stephen coming through. It's just the evolution of a team.
"And I've got to acknowledge the work that's been done with the academy in bringing these guys through. You've got to identify them first. Just by being a part of the environment, getting the exposure that they get when the internationals are away is vital for their development.
"So all of these young lads, they're getting their opportunities and they're taking it. And it's just the evolution of a professional rugby team."