On the Acquisition of Equity Carve-Outs

64 Pages Posted: 3 May 2011

See all articles by Chintal A. Desai

Chintal A. Desai

Virginia Commonwealth University (VCU)

Mark Klock

George Washington School of Business

Sattar Mansi

Virginia Polytechnic Institute & State University

Date Written: April 7, 2011

Abstract

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

Desai, Chintal and Klock, Mark and Mansi, Sattar, On the Acquisition of Equity Carve-Outs (April 7, 2011). Available at SSRN: https://ssrn.com/abstract=1829217 or http://dx.doi.org/10.2139/ssrn.1829217

Chintal Desai (Contact Author)

Virginia Commonwealth University (VCU) ( email )

1015 Floyd Avenue
Richmond, VA 23284
United States

Mark Klock

George Washington School of Business ( email )

2023 G Street
Washington, DC 20052
United States
202-994-8342 (Phone)
202-994-5014 (Fax)

HOME PAGE: http://savickas.net/cgi-bin/GWfinance/viewfaculty.cgi?fn=16

Sattar Mansi

Virginia Polytechnic Institute & State University ( email )

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