Explain what is meant by an equity carve-out.

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Explain what is meant by an equity carve-out.

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Explain what is meant by an equity carve-out.

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Equity carve-out is a process where a parent company differentiate its subsidiary company as a standalone company and sell some of the stock of the subsidiary company but not more than 20% to the general public. In such a situation, the parent company holds a controlling stake in the subsidiary and can also help the subsidiary in fulfilling its capital requirements.
Equity carve outs are also performed to diversify the operations of a business, splitting a business into two separate units helps to focus on two separate activities of the company effectively and can increase the profitability, that is one can focus on production while other can perform selling and marketing.

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