CARVE-OUT
Back to GlossaryDefinition
A transaction where a company sells a minority stake in a subsidiary or business unit, often via IPO or spin‑off.
Summary
A carve-out is a corporate restructuring strategy where a parent company separates a portion of its business by selling a minority stake (less than 50%) to outside investors. Unlike a complete spin-off where the entire subsidiary becomes independent, a carve-out allows the parent company to retain majority control while raising capital and providing the carved-out unit with more operational autonomy. This strategy is often used to unlock value in underperforming divisions, focus on core business activities, or raise funds without taking on additional debt.
Usage Context
Understanding carve-outs is crucial when studying corporate finance strategies, mergers and acquisitions, corporate restructuring, and investment banking. This concept is particularly important when analyzing how companies optimize their portfolio of businesses and create shareholder value.
Common Confusions
- Confusing carve-outs with complete spin-offs (carve-outs retain parent control)
- Thinking the parent company loses all connection to the carved-out unit
- Assuming carve-outs always involve IPOs (they can also involve private sales)
- Believing carve-outs mean selling a majority stake (they typically involve minority stakes)
