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When Carve-Outs Make Sense
Contrary to what many executives believe, equity carve-outs are no boon for boosting the stock price of their parent companies. McKinsey analysis of more than 200 major carve-outs over the past 12 years finds that few of them created value in the short term and that most destroyed value in the long term. The exception? Carve-outs that are part of long-term plans to float subsidiaries in their entirety do outperform the market.
The take-away: Planning an equity carve-out? Unless you intend to grant your carved-out subsidiary complete independence, you'll likely destroy shareholder value.
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