carveouts

A carveout is an exception or a separate entity carved out from a larger whole. In business, law, and policy, it refers to creating a stand-alone unit, granting a specific exemption, or selling a portion of a group while leaving the remainder intact. The term is used across multiple contexts to denote a deliberate narrowing or specialization of rules, obligations, or assets.

In corporate finance and mergers and acquisitions, carve-outs describe transactions that separate a part of a company from the whole. An asset carve-out sells or licenses a subset of assets to a buyer while the parent retains the rest. An equity carve-out, or partial IPO, sells a minority stake in a subsidiary to public investors while the parent keeps control. A spin-off or split-off is a related form that fully or partially separates a business unit into an independent company or entity.

In contracts and regulation, a carve-out refers to an exception within a general obligation or rule. Examples include exemptions for certain activities, entities, or timeframes, or liability limits carved out of broader terms. Regulatory and policy carve-outs are common in areas such as healthcare, antitrust, trade, and tax, where specific services, populations, or activities are treated differently from the general framework.

Benefits of carveouts can include targeted focus, value realization, and strategic flexibility. Risks include reduced synergies, integration challenges, and potential regulatory or shareholder pushback. Carveouts require careful valuation, governance arrangements, and communication to stakeholders to manage impacts on operations and capital structure.

See also: spin-off, divestiture, equity offering, liability carve-out.