Equity carve out

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Equity carve out

Usually occurs when a company decides to IPO one of their subsidiaries or divisions. The company usually only offers a minority share to the equity market. Also known as carve out.

Equity Carve Out

The act or process of a company making an IPO on one of its subsidies without fully spinning off. During an equity carve-out, the parent company becomes majority shareholder and only offers a minority share to the market. This gives the subsidiary a degree of autonomy (such as its own board of directors) while still retaining access to resources at the parent company. Most of the time, an equity carve-out ultimately results in the parent company fully spinning off the subsidy. It is also called a partial spin off.
References in periodicals archive ?
We find that improvements in operating performance following equity carve-outs are limited to the parent firms that completely divest their ownership stake in the subsidiary.
Announcements of equity carve-outs produce positive stock returns for parent firms (see, e.
Notwithstanding the various value gains or losses created by such structural ownership changes, the law of one price prescribes a particular pricing relation for equity carve-outs.
While the economic benefits of leveraged transactions have been studied extensively (see, for example, Jensen, 1989), there has been somewhat less investigation of equity-based restructurings, such as spin-offs, equity carve-outs, and dual-class recapitalizations.
Schipper and Smith (1983 and 1986) document positive market reactions to the announcements of both equity carve-outs and spin-offs of corporate as sets.
Nanda (1991), Slovin and Sushka (1995, 1997), and Schill and Zhou (2001) point out that equity carve-outs in part reflect the differential mispricing of parent and subsidiary shares.
For a sample period 1980 through 1991, the authors found that equity carve-outs were associated with significantly negative abnormal returns to other industry members.
The results suggest that equity carve-outs are an effective way for companies to exploit growth opportunities and increase shareholder value.
With CHC's current market capitalization under $400 million, it is easy to understand that these planned equity carve-outs may well unlock the true value of these entities and enhance the investments our shareholders have made in Computer Horizons Corp.
We examine the efficiency of initial public offering (IPO) pricing using a sample o[over 300 equity carve-outs from 1985 to 2009.
Equity carve-outs on average are associated with positive abnormal returns of 2 percent.
At least that's the main idea of taking a business unit public through a spin-off, tracking stock, or equity carve-out.