A divisional buyout or carveout, in finance, is a transaction in which a corporate division, business unit or subsidiary is acquired using the same financial structuring as a leveraged buyout.
Typically, in these transactions, the financial sponsor will turn the acquired business into a standalone company, necessitating the creation of certain functions that were formerly provided by the parent company.
Divisional reverse leveraged buyout (D-RLBO)
A D-RLBO is a leveraged buyout of a division or subsidiary that subsequently comes to trade on the public markets. From the point of view of a divesting firm, the D-RLBO permits the sale of a subsidiary to its management and/or private investors who subsequently restructure its assets and capital structure with the purpose of enhancing overall firm value.
Example: Avon Products Inc. divested specialty jeweler Tiffany & Co. to private equity investors who subsequently accomplished an initial public offering (IPO).