Essential Factors to Consider During a Spinoff Transaction

A spinoff transaction occurs when a company creates a new independent company through sale or distribution of new shares of its existing business. Spinoff transaction leads to strategic benefits by enabling each business to focus on its operational strengths and avoid financial resource extension. Also, the parent company and the shareholders will enjoy a tax-free spinoff. If you own a company and serving its real business purpose, you can consider a spinoff to create shareholder value. It will help your company save tax and focus mainly on the core assets and business. Although spinoff transactions can be easy, they are not always successful. Poor planning and focusing on near-term prospects can lead to ill-fated long-term results for both companies. Therefore, for a successful spinoff and creating a long-term value, consider the factors below.

Consider the business purpose of the spinoff. Before considering …