A carve-out transaction is a sale of a business line, division or portion of a larger company, usually driven by a strategic decision to divest from non-core assets, raise additional cash or walk away from underperforming divisions. Companies that are facing financial challenges may also be forced to divest certain business lines in order to raise capital. Private equity buyers may also use a carve-out transactions as a turn-around opportunity for a relegated asset that may provide an upside potential under the right management and focus.
These transactions present unique challenges to potential buyers as compared to traditional M&A deals. Seller and buyer will need to ensure that they have put sufficient thought into planning the transaction to maintain and maximize the value of the target business or assets.
* First published in Bloomberg Law