Equity carve-out

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Equity carve-out (ECO or a partial spin-off) is a sort of corporate reorganization, in which a company creates a new subsidiary and IPOs it later, while retaining control.[1] [2] Usually, up to 20% of subsidiary shares is offered to the public. The transaction creates two separate legal entities—parent company and daughter company—with their own boards, management teams, financials, and CEOs. Equity carve-outs increase the access to capital markets, enabling carved-out subsidiary strong growth opportunities, while avoiding the negative signaling associated with a seasoned offering (SEO) of the parent equity.

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