What’s a Spinoff? Why and How Companies Break Up: QuickTake

Household-name companies are breaking up, an effort to appeal to investors who want more streamlined businesses. A popular way to separate a company is through a spinoff, which creates two public companies with different areas of focus. The idea is to create value for investors in a tax-efficient way. Spinoffs historically have yielded mixed results for the new entity and the legacy business.

1. Why do companies opt for spinoffs?

They hope to be worth more as two separate entities than as one combined firm. A conglomerate may spin off a slow-growing unit that’s seen as tangential to its ...