A carveout is a term frequently used in business and legal contexts to describe a specific exception or exclusion from a larger set of rules, guidelines, or agreements. It refers to a provision that allows for the separation or removal of certain assets, liabilities, or obligations from a broader agreement or arrangement.
In corporate finance, a carveout often denotes the process of selling a portion of a company or its assets while retaining control over the remaining portion. This technique permits a company to divest a non-core business unit, subsidiary, or asset while still maintaining strategic control over its key operations.
In legal agreements, a carveout typically refers to exceptions or exclusions that limit the scope or applicability of a particular clause or provision. For instance, a contract might contain a confidentiality clause with a carveout that allows the sharing of information with government authorities or in response to legal obligations.
Carveouts can also exist in financial arrangements, such as loan agreements, where certain assets or revenues may be carved out from being used as collateral or to secure debt obligations. This allows the borrower to retain flexibility in utilizing those specific assets for other purposes.
Overall, a carveout represents a deliberate departure or exception made within a broader context to address specific needs, circumstances, or requirements.
