Carve-out Transactions

What is a Carve-out Transaction?
M&A practice, perhaps to a greater extent than other areas of legal practice, has lead to the popularisation of commonly used - and misused - legal terminology. Carve-out transactions refer to the acquisition or divestiture of part of an organisation, which has not necessarily been contained as a separate legal entity. In the most basic terms, carve-outs are typically recognisable as the sale, by a group, of an operating unit. The "unit" is part of a larger organisation that has broader functions.

Depending on such factors as whether the target business unit is to be sold in its entirety, whether the parent company is a publicly listed entity, the purpose of the divestiture and the intentions of the purchaser, carve-out transactions are sometimes referred to as "spin-offs", "spin-outs", "equity carve outs" or "demergers" amongst others. Whatever terminology we use to refer to this aspect of M&A practice, there are significant reasons