Define and explain the differences between: - Carve-Outs - Divestitures - Spinoffs - Split-Offs

Define and explain the differences between:

- Carve-Outs

- Divestitures

- Spinoffs

- Split-Offs

Expert Solution

A carve out involves separating a subsidiary or a business unit from the parent and selling it to investors through an intial public offering. This may be done for various reasons one of which may be separating two different types of businesses of the firm into two separate companies. The main aim of a carve out is to generate cash for the company.

A divestiture can include a broad range of transactions whose main aim is partial or full disposal of a subsidiary or business unit by closure or by selling it to other parties.

Unlike a carve out, a spin off involves separating a existing business unit of a firm and distributing shares of the unit to the existing shareholders on a prorata basis. So the main aim here is to separate different businesses and not generate cash. A spin off is generally not taxable whereas a carve out is.

In a spin off, shareholders get the shares of the newly created firm while holding on to their existing shares of the original firm. But in a split off, they have to choose between the original and the newly created firm.

jeff jeffy answered 2 years ago

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