Corporate spin-off: Difference between revisions

A '''corporate spin-off''', also known as a '''spin-out''',<ref>New Zealand Master Tax Guide (2013 edition) – p. 771 1775470024 CCH New Zealand Ltd – 2013 "Essentially, a 'spinout' involves the transfer by a parent company of shares in a wholly owned subsidiary to the shareholders in the parent. To the extent that there is a common interest in the old and new holding companies, the spinout ..."</ref> or '''starburst''' or '''hive-off''',<ref>{{cite web |title=Definition of hive off |url=https://www.thefreedictionary.com/hive+off |url-status=live |archive-url=https://web.archive.org/web/20210409231335/https://www.thefreedictionary.com/hive+off |archive-date=9 April 2021 |access-date=10 April 2021 |website=The Free Dictionary}}</ref> is a type of [[corporate action]] where a [[company]] "splits off" a section as a separate [[business]] or creates a second incarnation, even if the first is still active.<ref name="econ">{{cite news |date=March 24, 2011 |title=Starbursting |newspaper=[[The Economist]] |url=http://www.economist.com/node/18440915?story_id=18440915 |url-status=live |url-access=subscription |access-date=April 18, 2011 |archive-url=https://web.archive.org/web/20200807195044/https://www.economist.com/business/2011/03/24/starbursting?story_id=18440915 |archive-date=Aug 7, 2020}}</ref> It is distinct from a sell-off, where a company sells a section to another company or firm in exchange for cash or securities.

Spin-offs are divisions of companies or organizations that then become independent businesses with assets, employees, [[intellectual property]], [[technology]], or existing products that are taken from the [[parent company]]. Shareholders of the parent company receive equivalent [[shares]] in the new company in order to compensate for the loss of equity in the original [[StockCapital stock|stocks]]. However, shareholders may then buy and sell stocks from either company independently; this potentially makes investment in the companies more attractive, as potential share purchasers can invest narrowly in the portion of the business they think will have the most growth.<ref>{{cite journal|last1=Zahra|first1=Shaker A.|title=Governance, Ownership, and Corporate Entrepreneurship: The Moderating Impact of Industry Technological Opportunities.|journal=[[Academy of Management Journal]]|date=1 December 1996|volume=39|issue=6|pages=1713–1735|doi=10.2307/257076|jstor=257076}}</ref>

The [[United States Securities and Exchange Commission]]'s (SEC) definition of "spin-off" is more precise. Spin-offs occur when the equity owners of the parent company receive equity stakes in the newly spun off company.<ref>{{cite web |date=16 September 1997 |title=Division Of Corporation Finance Securities And Exchange Commission Staff Legal Bulletin No. 4 (CF) |url=https://www.sec.gov/interps/legal/slbcf4.txt |url-status=live |archive-url=https://web.archive.org/web/20220308203535/https://www.sec.gov/interps/legal/slbcf4.txt |archive-date=8 March 2022 |accessdate=8 March 2022 |website=SEC.gov |publisher=US SEC}}</ref> For example, when [[Agilent Technologies]] was spun off from [[Hewlett-Packard]] (HP) in 1999, the stockholders of HP received Agilent stock. A company not considered a spin-off in the SEC's definition (but considered by the SEC as a technology transfer or licensing of technology to the new company) may also be called a spin-off in common usage.

*[[Fortive]], Envista and [[Envista]]Veralto were spun off from [[Danaher Corporation|Danaher]] in 2016, 2019 and 20192023 respectively.