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A company can create an independent company from an existing part of the company by selling or distributing new shares in the so-called spin-off.


A situation in which a company offers stock in one of its wholly-owned subsidiaries or dependent divisions such that subsidiary or division becomes an independent company. The parent company may or may not maintain a portion of ownership in the newly spun-off company. A company may conduct a spin-off for any number of reasons. For example, it may wish to divest itself of one industry so it can expand into another. It may also simply wish to profit from the sale of the subsidiary. A spin off should not be confused with a split off.


In a spin-off, a company sets up one of its existing subsidiaries or divisions as a separate company.

Shareholders of the parent company receive stock in the new company based on an evaluation established for the new entity. In addition, they continue to hold stock in the parent company.

The motives for spin-offs vary. A company may want to refocus its core businesses, shedding those that it sees as unrelated. Or it may want to set up a company to capitalize on investor interest.

In other cases, a corporation may face regulatory hurdles in expanding its business and spin off a unit to be in compliance. Sometimes, a group of employees will assume control of the new entity through a buyout, an employee stock ownership plan (ESOP), or as the result of negotiation.

References in periodicals archive ?
Today, for Middle East companies, spin-offs have a critical strategic advantage.
Spin-off transactions have the ability to create new opportunities for companies.
Our results suggest that, on both growth indicators, spinoffs resulting from the exploitation of an opportunity by employees outperform corporate spin-offs initiated by incumbent firms and spin-offs that are the result of unfavorable developments in the incumbent.
Our motivations for separating spin-offs into sponsored and conventional spin-offs are twofold.
Shane demonstrates that spin-offs are "an important part of the economic landscape'.
The IRS has offered three alternative representations the company may make with respect to whether a spin-off and an acquisition of shares in the Parent or Spinco before or after the spin-off are part of a plan under section 355(e).
By combining a tax-free spin-off distribution under section 355 with a subsequent acquisition of either the distributing or controlled corporation by way of one of the methods for taxfree reorganizations (e.
For example, in a spin-off, the original option no longer has the economic value it had prior to the restructuring, because the entities have been separated and the sum of the separate economic parts may not equal the original economic whole.
Usually, the amount of tax at risk, the size and complexity of the transaction, and the presence of public shareholders require obtaining an advance ruling from the Internal Revenue Service when the taxDaver is planning a spin-off.
Cendant will refinance its public corporate debt securities upon the completion of the spin-offs of Real Estate Services and Hospitality.
The Board evaluated the Committee's recommendations, considered the rules regarding spin-offs, and determined that COG was qualified to be spun-off at this time.