Divisional buyout
In today's world, Divisional buyout has become increasingly relevant. Since its emergence, Divisional buyout has captured the attention of people around the world due to its impact on different aspects of daily life. Whether in the personal, social, political, economic or cultural sphere, Divisional buyout has proven to be a topic of general interest for various audiences. That is why in this article we will thoroughly explore the importance of Divisional buyout, its evolution over time and its influence on today's society. Through detailed analysis, we aim to offer a comprehensive perspective on Divisional buyout and its role in the contemporary world.
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 to enhance 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).
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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