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Spin-off

SPIN-off /ˈspɪnˌɒf/

nounC1GMATTOEFL

formalbusiness

The creation of a new independent company from an existing division or subsidiary of a parent company, with shares in the new entity distributed to existing shareholders.

A type of divestiture where the new company is not sold to another entity but is 'spun off' to become its own publicly traded company, often to unlock value or allow each entity to focus on its core business.

The story behind the word. The term 'spin-off' is a vivid English compound that emerged in the mid-20th century. It literally describes the action of a part 'spinning off' from a larger whole, much like a satellite separating from a rocket. In business, it means a division detaching from its parent company to become an independent entity, 'spinning' into its own orbit.

Word relationships

Divestiture: A 'spin-off' is a specific method of divestiture, where the new entity becomes independent rather than being sold.
Carve-out: Similar, but a carve-out often involves selling a minority stake in the new entity while the parent retains control, whereas a spin-off distributes shares to all existing shareholders.

Merger: Combining companies, the opposite of separating them.
Acquisition: Buying another company, rather than creating a new one from within.

Commonly confused with

Subsidiary: A subsidiary is owned and controlled by a parent company. A spin-off becomes an independent company, no longer a subsidiary.

Word family

spin off (verb): To create a new company from an existing one.

Collocations

successful spin-off
planned spin-off
tax-free spin-off
corporate spin-off

Example sentences

"The technology conglomerate announced a spin-off of its cloud computing division, believing it would thrive better as an independent company." Reporting on corporate restructuring.
"A spin-off allows a parent company to focus on its core business while giving the new entity the freedom to pursue its own growth strategy." Discussing business strategy.

Memory hook

A new company 'SPINS OFF' from the parent company, like a top spinning away. SPIN OFF = SEPARATE.

When not to use

Do not use 'spin-off' for a simple sale of a division to another company; that would be a divestiture. It specifically implies creating a new, independent, publicly traded entity.

Fun facts

Shareholders of the parent company typically receive shares in the new spin-off company proportional to their existing holdings.

Related words

Divestiture, Conglomerate

Explore more words

Share, IPO, dividend, shareholder, outsourcing, distribution