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. Corporate Action

    Any event that brings material change to a company and affects ...
  3. Baby Bills

    A hypothetical nickname for the smaller companies that would ...
  4. Baby Bells

    A common nickname given to the U.S. regional telephone companies ...
  5. Carve-Out

    The partial divestiture of a business unit. A company undertaking ...
  6. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
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. Professionals

    Are Stock Buybacks Always Good for Shareholders?

    Stock buyback programs aren't always done with the interests of shareholders in mind. It's important to try to understand the motivation behind such moves.
  5. Brokers

    10 Most Famous Public Companies That Went Private

    Here’s a list of the most popular listed companies that went private in recent decades.
  6. Investing

    Strategies Activist Shareholders Follow

    Activist shareholders, also called activist investors, are large-scale investors who use their investment power to influence public companies. While their goals can vary widely, the strategies ...
  7. Investing

    Has Nepotism Ever Worked?

    It may very well be that hiring a relative is the right course of action for you. But before you do, carefully consider how hiring family could hurt your business.
  8. Investing

    What Can A Conference Call Tell About Trends?

    Messages in a company conference call can be easily misconstrued. But there is a way to cut through the talking points to get to the real substance.
  9. Investing

    Why These Industries Are Prone To Corruption

    Corruption is like life in that it exists pretty much everywhere the conditions are favorable.
  10. Investing Basics

    Shareholders: Vote Your Proxy and Be Heard

    Voting shares, in person or via proxy ballot, is a right every shareholder should exercise. Here's why.
RELATED FAQS
  1. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  2. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!