Corporate Orphan

DEFINITION of 'Corporate Orphan'

A business unit or division that loses strategic importance due to changes in the larger corporation's overall goals. A corporate orphan can be created when a corporation fails to integrate a merger or acquisition successfully, or when a business or division fails to contribute to the overarching goals of the corporation. When this occurs quite often the business is spun off to preserve shareholder value.

BREAKING DOWN 'Corporate Orphan'

An example of a corporate orphan would be Skype being acquired by eBay. After purchasing Skype in 2005, eBay tried for years to implement Skype's services without much success. However, one company's corporate orphan can be another's success. In 2009, eBay sold 70% of Skype to private equity investors. The investors then sold Skype to Microsoft in 2011, for a considerable profit.