A spin-off is a transaction in which a parent creates a new legal subsidiary and distributes shares it owns in the subsidiary to its current shareholders as a stock dividend.
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A spin-off is a transaction involving a separate legal entity whose shares are sold to the parent firm’s shareholders.
The timing of a divestiture is important. If the business to be sold is highly cyclical, the sale should be timed to coincide with the firm’s peak year earnings.
In deciding to sell a business, a parent firm should compare the business’ after-tax value in sale with its pre-tax value to the parent as part of the parent.
Antitrust regulatory agencies may make their approval of a merger contingent on the willingness of the merger partners to divest certain businesses.