Convert a Physical Disk to a Virtual Hard Disk with Hyper-V

Hyper-V Server allows user to migrate the contents of a physical disk into a new Virtual Hard Disk (VHD) with simple process. However, there are several requirements to consider when using this method to migrate the contents of the physical disk into a VHD.

Limitations:
The limitations are as follows:

• VHD copy is limited to converting a physical disk, not a volume or a partition.
• VHD copy must be used only to migrate a data disk; operating system disk migration is not supported.
• VHD copy should be used to convert a physical disk that is not being accessed by the host operating system or applications during the conversion process.
• VHD copy requires that if the physical disk that is being converted is larger than 127 gigabytes (GB), you must attach the virtual hard disk into which the disk contents will be copied to a virtual SCSI adapter.

To begin the process and migrate the physical drive content to a new VHD, follow these steps:

Note: Before starting the VHD copy, you should use the Disk Management Microsoft Management Console (MMC) or other similar tool to remove the drive letter for the target drive. This will make the drive inaccessible to the host operating system, preventing disk corruption during the conversion process. 

1. Open the Hyper-V Manager console.
2. In the Actions pane, under the server name, click New and then select Hard Disk from the menu to launch the New Virtual Hard Disk Wizard.

3. On the Before You Begin page, click Next.

4. On the Choose Disk Type page, select the type of disk to create* (Fixed size or Dynamically expanding) and then click Next.

*You should use a fixed-size disk as the target for the VHD conversion unless you have a requirement for dynamic expansion of the virtual hard disk.

5. On the Specify Name And Location page, type a name for the new virtual hard disk in the Name box and then type a fully qualified path to the storage folder in the Location box, or click Browse to use Windows Explorer to select the storage folder. After you complete these actions, click Next.

6. On the Configure Disk page, select Copy the contents of the specified physical disk and then click the physical hard disk that you want to convert from the list that is presented. After you complete these actions, click Next.

7. On the Completing The New Virtual Hard Disk Wizard page, review your selections and then click Finish.

Depending on the size of the physical disk that you select to copy to a VHD, this process can take a considerable amount of time.

Reference:
TechNet Magazine: Tip: Convert a Physical Disk to a VHD