What is Carve-out?
A ‘Carve-out’ is a kind of reorganization of the company, wherein a company creates a sister concern and makes it public, while also retaining control. Around 20% of the shares are made public so that the parent company retains an equity stake in the subsidiary.
This kind of subsidiary creation is advantageous for the parent company as it allows the creation of the subsidiary’s market value based on the parent company’s credibility.
‘Carve-out’ also has another meaning in medical services. It refers to carving out separate provisions for a part of health insurance that was not included in the company’s health insurance plan; for example, dental insurance.