Whats the difference between a spin-off and a spin-out?
This was selected as Best Answer Barbara, a spin-off is when an operating subsidiary or division is cut out from the parent, usually done as a tax-free distribution of stock to the parent company’s shareholders but sometimes done as a taxable IPO. The operating rationale is that the spin-off will be more successful independently than as part of the parent over the long-term. The valuation rationale, which is by far more important in the real life M&A decision making process, is that the spin-off will receive a higher value in the stock market than as part of the whole, normally because it is expected to receive a higher earnings, cashflow and.or EBITDA multiple as an independent company. In a spin-off the parent company may keep a large stake in the business for a period of time, and then distribute or sell its remaining shares in what is essentially an arbitrage value play if the spin-off entity is in fact successful. If it’s not, the parent company may effect the same arbitrage value
