A Study On The Motivation And Value Creation Paths Of Domestic Company Carve-out

In the current market,the rough-and-trumble M&A expansion strategy is no longer suitable for most listed companies in China,and carve-out,as a form of contractionary asset restructuring,has received increasing attention in recent years.In 2019,the introduction of certain regulations for domestic carve-out filled the institutional gap for carve-out in China’s capital market,and in 2022 consolidated rules for carve-out of listed companies,which further improved the requirements for domestic and overseas carve-out of listed companies in China.The introduction of these policies has triggered a boom in the carve-out of domestic listed companies.It is worth exploring what are the real motivations for listed companies to choose carve-out,whether the carve-out of subsidiaries can achieve the expected returns and whether there is a common path for value creation.In this context,this paper firstly reviews and summarizes the overall situation of carve-out of domestic companies in China in the context of domestic listed companies,and then takes the carve-out of Sheng Yi Electronics by Sheng Yi Technology,the first share of ‘A to A’,as an analytical case.The thesis then explores the real motivations for the carve-out of Sheng Yi Electronics,analyses the impact of the carve-out on the parent and subsidiary,and summarises the value creation path of the carve-out.Through an in-depth analysis of the case companies,this paper finds that focusing on the main business,broadening financing channels,improving operational capabilities and improving corporate governance are the four main motivations for the carve-out of Sheng Yi Electronics.From the results of market reactions and financial data,the carve-out brought the parent company an excess rate of return in the short term,and also solved the problem of limited capital for the development of the subsidiary,while optimising the capital structure of them,and the operating capacity of the parent company,Sheng Yi Technology,was significantly improved after the carve-out.Due to the relatively short period of time since the carve-out,the operating performance of the subsidiaries has yet to be tested over a longer period of time.Based on the analysis in chapters three to five,this paper concludes that the value creation path of a carve-out is as follows.The carve-out has received positive feedback from the captical market in the short term,bringing excess returns to the parent company.The carve-out has increased the focus of the parent and subsidiary on their respective main businesses,which in turn has improved the profitability of the company.The carve-out has broadened the financing channels of the subsidiary,optimised the capital structure of the parent and subsidiary,and improved the solvency of the parent and subsidiary.These paths ultimately achieve the objective of increasing corporate value.