By Karen Sibayan, Staff Writer, Forum: For strategic buyers and private equity funds in search of quality targets, acquiring only a portion of a company through a spin-off can end up being a good proposition. Spin-offs are independent businesses created through a sale or a distribution of new shares of a parent company’s existing division.
These deals are on the rise. Equity research firm The Edge expects $1.5 trillion worth of global parent companies to execute spin-offs in 2015, over double 2014’s figure. Furthermore, the firm projects the value of these global transactions to reach $3 trillion by 2016. Domestically, The Edge expects an 18% increase in spin-off transactions, with around 40 to 42 US parent companies spinning off this year. This is compared to 34 transactions by U.S. parents last year.
What’s behind this upward momentum? Many companies and investors have realized that businesses can garner higher valuations if they are independently owned. Shareholder activists have also been exerting pressure on parent companies to maximize their worth through these transactions. Recent successful Spinoffs have also boosted their appeal…