On the acquisition of equity carve-outs

Chintal A. Desai, Mark Klock and Sattar A. Mansi

Journal of Banking & Finance, 2011, vol. 35, issue 12, 3432-3449

Abstract: We examine the role played by the parent’s motive in undertaking a carve-out; the 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 increase 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 acquisition likelihood and the level of acquisition premium. Additional analyses examining the post-IPO carve-out status suggest that the product-market relationship and post-IPO parent ownership increase the probability of re-acquisition.

Keywords: Equity carve-outs; Acquisition; Parent–subsidiary; Corporate restructuring (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:12:p:3432-3449

DOI: 10.1016/j.jbankfin.2011.05.021

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