Monthly Recurring Revenue

Positive EBITDA

Preference to entities with unencumbered assets

KEY TAKEAWAYS
• Unencumbered refers to assets or property without encumbrances, interests by other parties.
• Creditors have no interest in unencumbered assets as they are free and clear of debts and liens.
• Unencumbered assets are often easier to transfer than encumbered assets because only the seller and buyer must approve the transaction.
•In bankruptcy, the value of liquidated unencumbered assets is distributed to creditors.

Spin-Offs or Carve-Outs are Preferred

KEY TAKEAWAYSIn an equity carve-out, a business sells shares in a business unit. The ultimate goal of the company may be to fully divest its interests, but this may not be for several years. The equity carve-out allows the company to receive cash for the shares it sells now. This type of carve-out may be used if the company does not believe that a single buyer for the entire business is available, or if the company wants to maintain some control over the business unit.Another divestment option is the spin-off. In this strategy, the company divests a business unit by making that unit its own standalone company. Rather than selling shares in the business unit publicly, current investors are given shares in the new company. The business unit spun off is now an independent company with its own shareholders, and the shareholders now hold shares in two companies. The parent company does not usually receive any cash benefit, and may still own an equity stake in the new company. To be tax-free for the final ownership structure, the parent company must relinquish 80% of control or more