Understanding spin-off

A spin-off is a form of financial transaction that enables an existing company to transfer its activities to a new group, which may be a separate entity or a subsidiary. It is an integral part of [Private Equity](/en/blog/quest-what-private-equity-pe) and external growth transactions.

A spin-off means that the original entity sells or transfers its activities to another group. The activities transferred include personnel, product or service, the assembly of assets and skills, or the exploitation of a particular market.

The aim of a spin-off is to separate a company's existing activities in order to create a new group, which has distinct growth potential and targets a specific market. The original entity can then concentrate on their core business without being hampered by less profitable activities.

Once the spin-off has been finalized, the original and new entities operate independently and separately. The two entities can be financially independent, meaning that they are not dependent on each other.

A spin-off is therefore a financial transaction that enables a company to eliminate part of its activities in order to concentrate on its core business, and can also create a new, distinct entity that can take off.