Adivisional buyout orcarveout, in finance, is a transaction in which acorporate division, business unit, orsubsidiary isacquired using the same financial structuring as aleveraged buyout.
Typically, in these transactions, thefinancial sponsor will turn the acquired business into a standalone company, necessitating the creation of certain functions that were formerly provided by the parent company.
A D-RLBO is a leveraged buyout of a division or subsidiary that subsequently comes to trade on thepublic markets. From the point of view of adivesting firm, the D-RLBO permits the sale of asubsidiary to its management and/or private investors who subsequently restructure its assets and capital structure to enhance overall firm value.
Avon Products Inc. provides an example. Avon divested specialty jewelerTiffany & Co. toprivate equity investors who subsequently accomplished aninitial public offering (IPO).
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