A Spin off is, essentially, the opposite of a merger. In a spin off the existing business is separated from a big company to form a new entity. If the new company is wholly owned by the parent company, equity structure may not change. A company decides to go for spin off when the existing company is too large to handle the operations or if it thinks separate management structure would benefit the business.
Some times the new company may get listed as a separate company. In that case the new company’s shares are proportionately allocated to the parent company share holders.
A Television news channel separated out from a largely circulated news paper firm is an example of a spin off.
Mohan Bhupathiraju
Mohan Bhupathiraju is a co-founder & editor at LastBull.com. Handled multiple projects in BFSI for few of the Forbes top 100 companies. He works in IT industry in the US. Presently working on start up Ideas in Finance & Technology niches.
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