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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 |url=https://www.thefreedictionary.com/hive+off |title=Definition of 'hive off' |access-date=10 April 2021}}</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|title=Starbursting|url=http://www.economist.com/node/18440915?story_id=18440915|access-date=April 18, 2011|work=[[The Economist]]|date=March 24, 2011}}</ref>
==Characteristics==
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 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>
In contrast, [[divestment]] can also sever one business from another, but the assets are sold off rather than retained under a renamed corporate entity.
Many times, the [[management]] team of the new company are from the same parent organization. Often, a spin-off offers the opportunity for a division to be backed by the company but not be affected by the parent company's image or history, giving potential to take existing ideas that had been languishing in an old environment and help them grow in a new environment. Spin-offs also allow high-growth divisions, once separated from other low-growth divisions, to command higher valuation multiples.<ref>{{cite web|last1=Wisler|first1=Philip|title=Spin-off Transactions: A Disaggregation Strategy Promises Rewards|url=https://www.transactionadvisors.com/insights/spin-transactions|website=Transaction Advisors|access-date=January 17, 2015|date=May 2014}}{{subscription required}}</ref>
In most cases, the parent company or organization offers support doing one or more of the following:
* Investing [[Ownership equity|equity]] in the new firm
* Being the first customer of the spin-off that helps create [[cash flow]]
* Providing incubation space (desk, chairs, phones, [[Internet]] access, etc.)
* Providing legal, finance, or technology services
All the support from the parent company is provided with the explicit purpose of helping the spin-off grow.
===U.S. Securities and Exchange Commission===
The [[United States Securities and Exchange Commission]]'s 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|url=https://www.sec.gov/interps/legal/slbcf4.txt|title=DIVISION OF CORPORATION FINANCE SECURITIES AND EXCHANGE COMMISSION Staff Legal Bulletin No. 4 (CF)|website=sec.gov|publisher=US SEC|date=16 September 1997|accessdate=8 March 2022}}</ref> For example, when [[Agilent Technologies]] was spun off from [[Hewlett-Packard]] in 1999, the stock holders 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.
===Other definitions===
A second definition of a spin-out is a firm formed when an employee or group of employees leaves an existing entity to form an independent start-up firm. The prior employer can be a firm, a university, or another organization.<ref>{{cite book|last1=Richards|first1=Graham|title=Spin-Outs: Creating Businesses from University Intellectual Property|date=2008|publisher=Harriman House|location=Petersfield, Hampshire|isbn=9781905641987|url=https://books.google.com/books?id=i-LZ6w7HMg8C|access-date=November 14, 2017}}</ref> Spin-outs typically operate at [[Arm's length principle|arm's length]] from the previous organizations and have independent sources of financing, products, services, customers, and other assets. In some cases, the spin-out may license technology from the parent or supply the parent with products or services; conversely, they may become competitors. Such spin-outs are important sources of [[Diffusion of innovations|technological diffusion]] in high-tech industries.
Terms such as hive-up, hive down or hive across are sometime used for transferring a business to a parent company, a subsidiary company or a fellow subsidiary.<ref>{{cite web |url=https://www.icaew.com/technical/tas-helpsheets/financial-reporting/accounting-for-a-hive-up-under-frs-102 |title=Accounting for a hive up under FRS 102 |date=August 2019}}</ref><ref>{{cite web |url=https://www.burges-salmon.com/-/media/files/publications/open-access/guide_to_group_reorganisations_and_corporate_simplifications.pdf |title=Burges Salmon Guide to group reorganisations and corporate simplifications}}</ref><ref>{{cite web |url=https://stevejbicknell.com/2012/03/16/practical-uses-for-hive-up-and-hive-down/ |title=Practical Uses for Hive Up and Hive Down}}</ref>
==Reasons for spin-offs==
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