Data Structure
Networking
RDBMS
Operating System
Java
MS Excel
iOS
HTML
CSS
Android
Python
C Programming
C++
C#
MongoDB
MySQL
Javascript
PHP
Physics
Chemistry
Biology
Mathematics
English
Economics
Psychology
Social Studies
Fashion Studies
Legal Studies
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
What are the differences between spinoff and split off?
Before going for a spinoff and split off. Let us get an idea about Divestiture. Divestiture is nothing but selling a part of a division to create a separate company or another company. It is called the process of divestment.
Divestiture can be spin -off, split – off, split-up, equity carve – out etc. commonly used forms of divestiture are spin-off and split-off. Spin-off refers to business division, which becomes independent after separation. In the split off company holds some shares in the subsidiary.
Spin-off
Split off is a type of divestiture where a part of the business is disjoined and creates a new separate firm by issuing new shares. This is also called a spin-out or starburst. In this shares are distributed as dividends to existing shareholders.
The main aim is to compensate for loss of equity in initial stocks. Ownership is not changed as the company has the same shareholders and with their respective proportion. But shareholders have the choice of retaining their shares or selling them in the market.
Companies opt for spin off for the long term and have a good potential. Copyrights, trademarks etc. are transferred to newly formed entities.
Split-off
The term split-off is nothing but corporate restructuring. In these shares of the newly formed entity is transferred in return of equity of parent concern. It seems similar to stock purchase where a company buys its own shares.
Division that is separated from the parent company becomes a legal entity owned by parent organization shareholders and ownership remains with shareholders (holds the shares or not shareholders who have not surrendered their shares). Split-off saves hostile takeovers.
Differences
The major differences between a spinoff and a split off are as follows −
| Spin off | Split off |
|---|---|
| New division is formed from the parent company. | New entity is formed from the parent company. |
| Parent company is shut. | Parent company is not shut. |
| Share of parent company is sold and distributed to shareholders. | Shareholders can opt to hold the shares in the parent company or trade their shares to a new entity. |
| New entity has special identification. | Transactions of parent company and new entity are differentiated. |
| Parent companies can enjoy the tax benefits. | Parent company can’t enjoy tax benefits. |
| Existing shareholders can enjoy benefits from the parent company and new entity. | Premium is offered to shareholders, after they trade their shares to the new entity. |
741 Views
