Types of Divestitures

Anybody have a good way to remember the key differences among equity carve-outs, spin-offs, and split-offs? I can’t seem to regularly associate certain characteristics with each one.

I get stuck on those too! I think you need to focus on who has ownerships, whether they’re attached or not, and whether the stock is separate from what it used to be or just a subsidiary. I think all cases the ownership is changed to the sub.

My tips to remember:

  1. Equity carve-out: maybe having IPO for a part of the subsidiary’s stocks,

  2. Spin-off: no cash inflow in constrast with sale of the subsidiary, the parent’s current shareholders now own shares of the both

  3. Split-off: an indicator of bad performance, the parent transfered the subsidiary’s stocks to some current shareholders in exchange for their stocks of the parent companies.

why does split-off indicate a bad performance?