How to take a chunk out of a mesh at runtime

If you’ve ever played Littlebigplanet, You’ve probably witnessed how when a bomb goes off near a soft material, it removes part of the material. I’m basically trying to find a way to modify a mesh in a smiler way using unity. Take the example below of removing a circle out of a mesh.

I’m not to sure how difficult it would be to make a system like this, but if anybody has an idea, or could point me in the right direction of where to learn, it would be very appreciated. I would ideally like textures and colliders to still work. Maybe physics to work too if the object gets split into multiple pieces. Thanks!