Divisional buyout

A divisional buyout or 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 with the purpose of enhancing 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).

gollark: Markets seem to work better than the alternatives, at least. Perhaps I'm just saying this because I live in a reasonably wealthy country and whatever, but you know.
gollark: Although yes, you probably can't have everyone run large customer facing businesses.
gollark: Approximately, sure. But with higher skilled jobs. And you could still have offices and whatnot if your contract included coming in to physically work with people.
gollark: > cuz if everyone would run a business things wouldnt go well(responding to this)
gollark: Not under the current model of work, but you could replace "go to work and are paid to do whatever is directed by someone" with "hired on contract to perform some specific task".

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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