| Description |
This paper investigates the shareholder value implications of spinoffs for the seller (ParentCo) among public companies. In 2022 alone, U.S. firms announced 44 significant spinoffs and completed 20, representing over $61 billion in value.1 As one of the most common strategic transactions companies turn to, it is important to understand a spinoffs' value implications and what value comes from the ParentCo and SpinCo. To investigate the value implications, the equity returns of selling companies were tracked and compared to the returns of other companies that announced a spinoff but ultimately cancelled the transaction. All returns were benchmarked against the S&P 500. The results indicate that although both companies that cancelled and those that followed through with a spinoff or split-off underperformed the S&P 500 over the next year, companies that completed a divestiture outperformed those that cancelled by an average of 14.7% relative to the S&P 500. These findings could be used by strategic decision makers to better plan and prepare for potential spinoff transactions in terms of timing, post-spinoff transactions, etc. Greater preparation and planning based on this data could help companies save shareholder value and avoid being forced to cancel a spinoff transaction. |
