Equity Carve-Out

An equity carve-out, also known as a partial spin-off, is a corporate restructuring strategy where a parent company sells a minority stake in a subsidiary to the public through an initial public offering (IPO). This allows the parent company to raise capital while still retaining control over the subsidiary. An equity carve-out is used to unlock the value of the subsidiary, attract strategic investors, and create a separate valuation for the subsidiary that may not have been fully recognized within the parent company.

Example

A large conglomerate carves out a 30% stake in its fast-growing technology division, selling shares in an IPO to raise funds while keeping control of the subsidiary.