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Takeovers, Spin-Offs, and Divestitures Explained

The document outlines various corporate strategies including takeovers, spin-offs, splits, equity carve-outs, and disinvestment. A takeover involves acquiring control of a target company, while spin-offs create a subsidiary that retains ties to the parent company. Splits aim to enhance profitability by dividing the company, and disinvestment refers to the liquidation of stocks to influence policy changes.

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Adarsha L
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11 views7 pages

Takeovers, Spin-Offs, and Divestitures Explained

The document outlines various corporate strategies including takeovers, spin-offs, splits, equity carve-outs, and disinvestment. A takeover involves acquiring control of a target company, while spin-offs create a subsidiary that retains ties to the parent company. Splits aim to enhance profitability by dividing the company, and disinvestment refers to the liquidation of stocks to influence policy changes.

Uploaded by

Adarsha L
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

TAKEOVER AND

DIVESTITURES
TAKEOVER
• A takeover occurs when an acquiring company makes a bid in an
effort to assume control of a target company, often by purchasing a
majority stake. If the takeover goes through, the acquiring company
becomes responsible for all of the target company’s
operations, holdings and debt. When the target is a publicly traded
company, the acquiring company makes an offer for all of the
target’s outstanding shares.
SPIN OFFS
• A company creates a subsidiary company. The shares of the new entity
are distributed to the shareholders of the parent company on a pro-rata
basis. However, the parent company also retains ownership in the
spun-off entity. Spin-offs have two approaches that can be followed.
• In the first approach, the company distributes all the shares of the new
entity to its existing shareholders on a pro rate basis. This leads to the
creation of two different companies holding the same proportions of
equity as compared to the single company existing previously.
• The second approach is the floatation of a new entity with its equity
being held by the parent company. The parent company later sells the
assets of the spun off company to another company.
SPLITS

Splits involve dividing the company into two or more parts. This is done with
an aim to maximize profitability by removing stagnant units from the
mainstream business. Splits can be of two types, Split-ups and Split-offs.
When a company splits itself into two or more entities, it is termed as split-
ups. In such cases, the parent company loses its existence.
EQUITY CARVE-OUTS
• Equity carve-outs are referred to a percentage of shares of the
subsidiary company being issued to the public. This method leads to a
separation of the assets of the parent company and the subsidiary
entity. Equity carve outs result in publicly trading the shares of the
subsidiary entity.
DISINVESTMENT
• Disinvestment occurs when a company boycotts or liquidates stocks.
The aim of disinvestment is to pressurize a government for a change
in rules. Another aim is to pressurize a company or industry for a
change in policy.

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