ktgicorp - Service - Divestiture & Spin Offs

Here's a more detailed explanation:

Divestiture:

Definition:
Divestiture, also known as divestment, is the process of a company selling off or disposing of a portion of its assets, operations, or a subsidiary to another company.
Reasons:
Companies may choose to divest for various reasons, including:
Focus on core business: To concentrate on their primary activities and improve efficiency.
Reduce costs: By eliminating redundant operations or non-core assets.
Improve shareholder value: By streamlining operations and focusing on higher-growth areas.
Repay debts: Divestiture can generate revenue to reduce debt.
Examples:
A company might sell off a division that is not performing well or that doesn't fit with its long-term strategy.

Spin-off:

Definition:
A spin-off is a specific type of divestiture where a parent company creates a new, independent company from one of its existing subsidiaries or business units.
Process:
The parent company distributes shares of the new, independent company to its existing shareholders, typically in proportion to their ownership in the parent company.
The new company becomes a separate entity with its own management and operations.
Reasons:
Unlock value: A spin-off can allow a subsidiary to be valued more effectively as a standalone entity.
Improve focus: The parent company can focus on its core business, and the spun-off company can focus on its own specific industry or market.
Attract investors: A spin-off can create a new investment opportunity for investors.
Example:
A company might spin off a technology division to create a new, independent technology company.

Key Differences:

Feature	Divestiture	Spin-off
Definition	Selling off assets or business units	Creating a new independent company from an existing subsidiary
Shareholder Impact	Shareholders of the parent company do not receive shares in the new entity	Shareholders of the parent company receive shares in the new entity
Ownership	The new entity is owned by a third party	The new entity is owned by the shareholders of the parent company

Divestiture & Spin Offs