26 PRINCIPLES OF PRIVATE FIRM VALUATION
Company A without subsidiary B
Subsidiary B
Shareholders
Shareholders implicity own 100% of equity of subsidiary B through their
Company A shares.
FIGURE 2.5 Equity Carve-Out
Company A without subsidiary B
Portion of
sub B equity
not sold
Shareholders
NEW INVESTORS
X% of sub B equity sold
for cash to new investors
X% of Company
B shares
Shareholders now own 100% of
Company A (without B) and (1-X)%
of Company B implicitly through
their Company A shares.
(b)Company after Carve-Out
(a)Company before Carve-Out