What is a spin-off?

A spin-off happens when a company separates a division or component of its business into an entirely new business entity. There are many reasons for a spin-off. Spin-offs can assist in growth trajectory through the development of a high-growth division or business. This could be done to sell a part of the business. The part was not related to the company’s focus.

Some 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 through the issuance of new company stock equivalent to their equity loss from the spin-off

General Electric has recently undergone a spin-off, which divided it into three separate entities. These entities focus on aviation, healthcare, and energy. The aviation business will keep 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, explore our Capital Markets Transactions solutions.