An equity carve-out differs from a spin-off for all but which one of the following reasons?
A) Generates a cash infusion into the parent
B) Is undertaken when the unit has very little synergy with the parent
C) The proceeds often are taxable to the parent
D) Continues to be influenced by the parent's management and board
E) The carve-out's shareholders may differ from those of the parent's shareholders

Question

Quizplus · Accepted Answer

All of the other statements are true for both equity carve-outs and spin-offs. The main difference between the two is that an equity carve-out usually involves the parent company selling a portion of its ownership in a subsidiary to outside investors, while retaining a controlling interest. In contrast, a spin-off involves the parent company distributing the subsidiary's shares to its own shareholders, resulting in a completely separate and independent publicly traded company. The decision to pursue an equity carve-out instead of a spin-off may be driven by factors such as the parent company's desire to maintain some degree of control over the unit, or the perception that the unit may not be as attractive to investors as a standalone entity.

An Equity Carve-Out Differs from a Spin-Off for All but Which