Split-Up

AAA

DEFINITION of 'Split-Up'

A corporate action in which a single company splits into two or more separately run companies. Shares of the original company are exchanged for shares in the new companies, with the exact distribution of shares depending on each situation. This is an effective way to break up a company into several independent companies. After a split-up, the original company ceases to exist.

INVESTOPEDIA EXPLAINS 'Split-Up'

A company can split up for many reasons, but it typically happens for strategic reasons or because the government mandates it. Some companies have a broad range of business lines, often completely unrelated. This can make it difficult for a single management team to maximize the profitability of each line. It can be much more beneficial to shareholders to split up the company into several independent companies, so that each line can be managed individually to maximize profits. The government can also force the splitting up of a company, usually due to concerns over monopolistic practices. In this situation, it is mandatory that each segment of a company that is split up be completely independent from the others, effectively ending the monopoly.

RELATED TERMS
  1. Discontinued Operations

    A segment of a company's business that has been sold, disposed ...
  2. Baby Bills

    A hypothetical nickname for the smaller companies that would ...
  3. Corporate Action

    Any event that brings material change to a company and affects ...
  4. Carve-Out

    The partial divestiture of a business unit. A company undertaking ...
  5. Scrip

    1. A written document that acknowledges a debt. 2. A temporary ...
  6. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
RELATED FAQS
  1. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  2. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  3. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
  4. How can an investor determine a company's annual return from looking at its financial ...

    The funds in a share premium account cannot be used for a company's general expenses. These funds are restricted in terms ... Read Full Answer >>
  5. What are some advantages of ordinary shares?

    Ordinary, or common, shares have many benefits for both the investor and the issuing company. For individuals, investing ... Read Full Answer >>
  6. What is the difference between preference and ordinary shares?

    Preference shares, also known as preferred shares, have the advantage of a higher priority claim to the assets of a corporation ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    Proxy Voting Gives Fund Shareholders A Say

    You have the right to take part in important company decisions - even if you cannot attend the meetings.
  2. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  3. Personal Finance

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  4. Investing

    The Strong Dollar’s (Real) Toll On Tech Stocks

    A large portion of U.S. technology companies’ sales occur overseas, given the strong international business and consumer demand from many U.S. tech firms.
  5. Stock Analysis

    Google Stock: A Tale of Two Share Classes

    Google stock comes in two different flavors with different rights for shareholders.
  6. Economics

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  7. Professionals

    Understanding Operations Management

    Operations management is concerned with converting materials and labor into goods and services as efficiently as possible to maximize profits.
  8. Investing Basics

    What are Ordinary Shares?

    Ordinary shares are any type of shares that are not preferred and don’t pay any type of predetermined dividend amount.
  9. Investing News

    A New Corporate Governance Initiative In Japan

    Expectations are low that Japan can create a corporate governance climate that meets global standards, but a new initiative is aimed at doing just that.
  10. Investing Basics

    Explaining Rights Offering

    A rights offering is an offer by a company to its existing shareholders of the right to buy additional shares in proportion to the number they already own.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center