Spin Out

DEFINITION of 'Spin Out'

A type of corporate restructuring. Spin outs occur when a corporation breaks off parts or divisions of itself to form a new corporation. The new company that is spun out brings with it some of the parent company's assets and equipment. The SEC defines a spin out as when the parent company has a stake in the equity of the newly formed company.

BREAKING DOWN 'Spin Out'

Parent companies often provide support for their "children" by investing equity in them or becoming their first major customer. In many cases, the management team of the spin out firm is drawn from the parent company as well. Parent companies spin out new companies from themselves for many reasons, such as to market a new product under a different company name.

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