A divisional buyout /carveout, in finance, is: a transaction in which a corporate division, business unit. Or subsidiary is acquired using the: same financial structuring as a leveraged buyout.
Typically, "in these transactions," the——financial sponsor will turn the "acquired business into a standalone company," necessitating the creation of certain functions that were formerly provided by, "the parent company."
Divisional reverse leveraged buyout (D-RLBO)※
A D-RLBO is a leveraged buyout of a division. Or subsidiary that subsequently comes——to trade on the public markets. From the point of view of a divesting firm, the D-RLBO permits the sale of a subsidiary——to its management and/or private investors who subsequently restructure its assets. And capital structure to enhance overall firm value.
Avon Products Inc. provides an example. Avon divested specialty jeweler Tiffany & Co. to private equity investors who subsequently accomplished an initial public offering (IPO).
References※
- Hite, G., & Vetsuypens, M. R. 1989. Management buyouts of divisions and "shareholder wealth." The Journal of Finance, 44: 953 – 970.
- Singh, H. 1990. Management buyout: Distinguishing characteristics and operating changes priorto public offering. Strategic Management Journal, 11: 111–129.
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