Though the business community continues to recover from the economic collapse of 2008 and the more recent international debt crisis, the M&A market has experienced steady activity and even growth in recent months. This is principally the result of converging interests within the business community as sellers explore exit options and opportunities to downsize operations while buyers seek to acquire high-value businesses at discounted prices. An increasingly popular transaction structure that accommodates these harmonized interests is a “carve-out transaction,” through which a company sells a stand-alone portion of its business, generally a division or subsidiary (which we will refer to in this article as a “Target Business”), to one or more acquirers. Frequently, such carve-out acquirers are private equity-backed. In an economy where cost efficiency is more crucial than ever, carve-out transactions allow sellers to divest business segments that simply do not mesh with the company’s operational focus.
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