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On the acquisition of equity carve-outs

Author

Listed:
  • Desai, Chintal A.
  • Klock, Mark S.
  • Mansi, Sattar A.

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.

Suggested Citation

  • Desai, Chintal A. & Klock, Mark S. & Mansi, Sattar A., 2011. "On the acquisition of equity carve-outs," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3432-3449.
  • Handle: RePEc:eee:jbfina:v:35:y:2011:i:12:p:3432-3449
    DOI: 10.1016/j.jbankfin.2011.05.021
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:finsta:v:34:y:2018:i:c:p:121-135 is not listed on IDEAS
    2. Michel, Allen & Oded, Jacob & Shaked, Israel, 2014. "Ownership structure and performance: Evidence from the public float in IPOs," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 54-61.

    More about this item

    Keywords

    Equity carve-outs; Acquisition; Parent–subsidiary; Corporate restructuring;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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