Split-Off

AAA

DEFINITION of 'Split-Off'

A means of reorganizing an existing corporate structure in which the stock of a business division, subsidiary or newly affiliated company is transferred to the stockholders of the parent company in exchange for stock in the latter. Split-offs often occur when the parent company wishes to draw a greater distinction between itself and the split-off business.

INVESTOPEDIA EXPLAINS 'Split-Off'

It is probably wise to treat split-offs with suspicion, as companies will often use them to bolster the balance sheet by shedding underperforming or unprofitable divisions and/or subsidiaries. For example, when Blockbuster started feeling the pinch from other, cheaper DVD retailers and cable companies offering video-on-demand and easy video recording, Viacom announced plans to split-off of its 81.5% stake in the one-time video rental giant and was even willing to absorb a $1.3 billion charge to do it. The split-off was completed in 2004. On Sept. 23, 2010, Blockbuster filed for Chapter 11 bankruptcy protection.

RELATED TERMS
  1. Sum-Of-Parts Valuation

    Valuing a company by determining what its divisions would be ...
  2. Carve-Out

    The partial divestiture of a business unit. A company undertaking ...
  3. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Parent Company

    A company that controls other companies by owning an influential ...
  6. Wholly Owned Subsidiary

    A company whose common stock is 100% owned by another company, ...
RELATED FAQS
  1. Why is the 1982 AT&T breakup considered one of the most successful spinoffs in history?

    AT&T had a history reaching back to 1885 and, as a government-supported monopoly, was a highly profitable company. Colloquially ... Read Full Answer >>
  2. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Full Answer >>
  3. How do businesses decide whether to do FDI via green field investments or acquisitions?

    When businesses decide to expand their operations to another country, one of the more important dilemmas they can face is ... Read Full Answer >>
  4. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  2. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  3. Economics

    What is a Spinoff?

    Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs.
  4. Trading Strategies

    General Electric: Good News/Bad News

    General Electric is generous to its shareholders, but that's not the only factor to consider.
  5. Stock Analysis

    A United Technologies Product: Always Closeby

    If you flown in an airplane, shopped for food or sat comfortably in a hot climate, you've probably used a United Technologies product.
  6. Stock Analysis

    How Warren Buffett made Berkshire Hathaway a World-beater

    It would almost be easier to list the industry sectors in which Omaha-based Berkshire Hathaway Inc. (NYSE:BRK.A) doesn’t turn gargantuan profits.
  7. Fundamental Analysis

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  8. Investing News

    This Company Is No Mickey Mouse Operation

    With its famous history that's become part of popular culture, and the instantly recognizable silhouette in its logo, The Walt Disney Co. is only an animation studio in the same way that Johnson ...
  9. Chart Advisor

    This ETF Will Deliver Upside With Downside Protection

    With markets near all-time highs as naysayers warn of a coming correction, how can you stick around for more gains and still limit downside risk? The answer could be industrials.
  10. Investing News

    What Will Become of Berkshire Hathaway Beyond Buffett?

    Warren Buffett, who has become almost synonymous with the term “investor,” remains robust, but at 83 is clearly somewhere in the fourth quarter of the game. What does that mean for Berkshire ...

You May Also Like

Hot Definitions
  1. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  2. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  3. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  4. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  5. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
Trading Center