On the Acquisition of Equity Carve-Outs
64 Pages Posted: 3 May 2011
Date Written: April 7, 2011
We examine the role played by the parent’s motive in undertaking a carve-out; parent’s post-IPO influence over the carved-out subsidiary; and anti-takeover provisions and industry structure of a carve-out on its acquisition likelihood and its acquisition premium. We find that the probability and hazard of a carve-out acquisition increases when the parent’s objective is to unlock the value of a subsidiary and when the parent and the subsidiary are tied with a product-market relationship. We also find that the post-IPO parent ownership significantly affects the likelihood and level of acquisition premium. Additional analyses examining the post-IPO carve-out status suggest that the impact of a product-market relationship and post-IPO parent ownership increase the probability of re-acquisition.
Keywords: Equity carve-outs, Acquisitions, Parent-Subsidiary, Anti-takeover provisions
JEL Classification: G34, G32
Suggested Citation: Suggested Citation