A spinoff is the formation of a new, independent business through the selling or distribution of additional shares of an already operational enterprise or parent company division.
The spun-off businesses are anticipated to be more valuable as standalone enterprises than as components of a larger company.
When a business unit with its own management structure is spun off by a corporation, it is established as a separate company with a new name for the business entity.
If a parent firm believes that spinning off a portion of its business will be profitable, it will do so. The assets, intellectual property, and human resources of the spinoff will remain the same, but it will have a different management structure and a new name. In most instances, the parent firm will continue to offer financial and technological support.
A spinoff might happen for a number of reasons. A firm may spin off a division in order to concentrate its resources and manage it more effectively in the long term. Businesses that want to streamline their operations frequently spin out less successful or unrelated subsidiary companies. An organization might, for instance, spin-off one of its older business units that are growing slowly or not at all, in order to concentrate on a good or service with better development potential.