Carve-Out
A partial IPO in which a parent company sells a minority stake in a subsidiary to public investors while retaining majority ownership.
What is Carve-Out?
A carve-out (or equity carve-out) occurs when a parent company sells a portion — typically a minority stake — of a subsidiary through an initial public offering, creating a separately traded public company. Unlike a full spin-off, the parent retains majority ownership and control of the subsidiary. Carve-outs allow parents to unlock value by establishing a market price for the subsidiary, raise capital for the subsidiary without burdening the parent's balance sheet, and create a currency for acquisitions and employee compensation. Carve-outs sometimes serve as a first step toward a complete spin-off. They require the subsidiary to establish its own governance, reporting, and public relations infrastructure.
Example
In 2020, Verizon carved out its Verizon Media unit (formerly Oath, which included Yahoo and AOL) by selling it to private equity firm Apollo Global Management. In another example, General Electric carved out GE HealthCare in 2023, listing it on Nasdaq while retaining an initial 19.9% stake. This carve-out gave GE HealthCare an independent valuation and allowed GE to reduce its stake over time as part of its broader portfolio simplification strategy.
Source: SEC — IPO Filings