Corporate Consolidation

What is corporate consolidation?

Corporate consolidation is when two or more businesses (business units or companies) merge to become a single larger entity. Corporate consolidation looks a lot like a basic merger transaction. Two or more organizations join into one. The main difference is that a consolidation transaction creates an entirely new business entity (mainly relevant from a legal/tax perspective). There are many reasons for a Spin-off. Spin-offs can assist in growth trajectory by developing a high-growth division or business. Or a Spin-off could be done to sell a portion of a business that wasn’t aligned with the company’s focus. Some Spin-offs occur when a company wants to sell a portion of itself and can’t find a buyer. No matter the situation, when a Spin-off transpires, shareholders in the parent company are compensated by issuing new company stock equivalent to their equity loss from the Spin-off. A recent example is the Spin-off of General Electric, which will become 3 focused entities in the areas of: aviation, healthcare and energy with the aviation business retaining the General Electric name. The reasons given for the Spin-off by General Electric included greater strategic business-specific focus and flexibility to drive long-term growth and value for the three business units. For support and additional information about corporate consolidation and spin offs, explore our mergers & acquisitions solutions.