An equity carve-out would best accomplish BigCo's objectives. The shares in the new company would be sold in an initial public offering, which would generate new capital. Furthermore, BigCo could retain majority control of the new company, because usually the parent company sells only part of the stock in the carved-out new company. As majority stockholder in the new company, BigCo can reward managers based on the stock's performance, which can serve as an incentive to attract and retain managerial talent.
A spinoff could give incentives to management of the spun-off unit because managers could be given stock or stock options in the new company. However, a spinoff would not raise the new capital that is needed.
Sale of the division to another firm would not achieve any of BigCo's objectives. It would not create additional capital to support the further development of the technology. BigCo would not retain control of the division, and there would be no incentive program that BigCo could control that could attract and retain managerial talent.
A management buy-out of the division would not achieve any of BigCo's objectives. It would not create additional capital to support the further development of the technology. BigCo would not retain control of the division, and there would be no incentive program that BigCo could control that could attract and retain managerial talent.
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