Examples of Carve Outs: Equity Carve Out IPOs
What is a company carve out?
A carve out is when a company sells a part of its business via initial public offering (IPO), while retaining controlling shares.
Learn more: Carve Out Process
Carve out IPO examples in financial services
Deutsche Bank
In 2018, Deutsche Bank listed its asset management arm, DWS Group, on the Frankfurt stock exchange. The long-awaited IPO saw Germany’s largest lender sell 22.5% of the company in a deal totalling approximately USD $1.4 billion.
The IPO of DWS marks one of Germany’s biggest listings in recent years. CEO of DWS, Nicolas Moreau, said, “we are the first asset manager being listed in Germany, we are the largest in Europe and we have got great ambition”. The carve out was reported to be a critical step in the bank’s turnaround strategy.
AIG
September 2022 saw Corebridge Financial, a carve out of AIG's retirement services and life insurance business, go to IPO in a deal netting $1.68 billion.
The biggest deal of the year so far saw AIG sell 80 million Corebridge shares at $21 per share, at the lower end of their indicated target range due to Russia's invasion of Ukraine and rising interest rates driving stock market volatility. All funds went to AIG.
Examples of carve outs in the pharmaceutical industry
AstraZeneca
In 2015, AstraZeneca carved out its antibiotic research and development arm into a new $40 million company. Funds raised were set to be invested into the new company in response to increased demand for novel medicines to fight drug-resistant superbugs.
When to carve out and when to spin
Business leaders considering a demerger of one of their business units might ask themselves, “do we carve out, or do we spin?” The main difference between a carve out and a spin off is that in a carve out, capital is raised and the parent retains equity in the subsidiary. In a spin off, however, the stock in the subsidiary is distributed to existing shareholders by way of a dividend.
In reality, a common occurrence is to have a carve out followed later by a spin off. This is because the equity carve out via IPO generates a market valuation for the subsidiary business as well as a legitimate transaction history.
See also:
Plan and execute your carve out with Ansarada
Frequently asked questions
What are carve out projects?
‘Carve out project’ is the term usually used by the IT community to describe the de-linking of business operations from the parent company and transference of it either to a separate system or another existing system. Either the seller or buyer can perform the necessary carve-out activities to separate IT and other systems. It can also be done before or after identifying the potential buyer.
How would you predict the effect of a carve out on a company's stock price?
In theory, there should be no effect on stock price. The company simply receives cash from their IPO.