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A spin-off is the separation of a subsidiary or division by distributing its shares to the parent’s existing shareholders, creating a new independent company without a third-party cash sale.
In a trade sale or divestiture for cash, a third party pays. In a spin-off (UK: often a demerger), the parent’s shareholders receive shares in NewCo pro rata. No sale process, no financial buyer IC — but still a full carve-out operationally, plus listing or private-company governance for NewCo.
Motives: conglomerate discount, distinct capital structures, regulatory ring-fence, management focus, tax (jurisdiction-specific, easy to get wrong).
Illustration only.
Parent equity value €2.0bn. Division that will spin: internal DCF €450m. After announcement, sum-of-the-parts traders argue the stub is worth €1.7bn + €0.5bn listed NewCo = €2.2bn. Whether that gap is real depends on stranded costs and NewCo’s cost of capital standing alone — the same economics as a carve-out sale, different liquidity path.
Spin-offs can unlock listing-currency for a growth unit without selling control. They strand shareholders who wanted only the other business (they can sell NewCo in the market). Governance of two listed companies costs twice.
Large listed groups; some private groups using a demerger for family branching (different tool, similar idea).
Not a cash exit for the parent. Tax-free treatment is a legal product, not a default. Unsuitable for most €20–150m companies that need a buyer, not a second share register.
Dazur still builds a standalone valuation file for a spin candidate: if you cannot value NewCo on its own numbers, you cannot tell whether the demerger is more than a press release.