How an Equity Carve-out Works

A respected presence in the Chicago business community, Paul Liska is a multitalented professional whose contributions to the industry span four decades. Paul Liska possesses specialized experience in financial reporting, mergers and acquisitions, and organizational restructuring.

Corporate restructuring and reorganization include strategies such as an equity carve-out, in which a parent company sells all or some of its shares in its wholly-owned subsidiary to the public through an initial public offering but still retains management control. Under this arrangement, limited shares are offered to the public while a majority stake remains with the parent company. Since some shares are sold to the public, a carve-out paves the way for a new set of shareholders in the subsidiary.

By adding new shareholders, a carve-out effectively separates a subsidiary from the parent company to create a standalone company with a board of directors and financial statements. However, the parent company still manages the new company and offers strategic support and resources to help the new business succeed.