Spin-off and Carve-out IPO / Spin Overview

As the coronacrisis progresses, we expect companies to separate portions of business. Such actions will be driven by strategic decisions to divest businesses and/or valuation creation opportunities. These may take form of spin-offs, carve-outs or sales. Primary reasons for spin-off include (i) Value creation – both for parent company and new separate public company; (ii) Certainty of execution; (iii) Tax free to parent and its shareholders; (iv) Can be run parallel with other divestiture alternative. These are typically a 6-12-month process that involves carving out a business from the parent (e.g. financials, management). It involves various documentation and filing requirements (e.g. SEC filings, IRS private letter ruling) and may or may not be preceded by an IPO. We provide an overview here.

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Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech ActiveAllocator.com, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Chief Economist & Managing Director at AR Capital. Before that he headed Investment Content & Strategy at UBS Alternative Investments. At UBS, he served as a non-voting member of the Wealth Management Research investment committee, and as a capital allocator was responsible for all illiquid investing including fund manager selection and due diligence across the platform. Prior to UBS he headed product development & investment research at Citigroup Alternative Investments that managed over $75 billion of alternative investments across hedge funds, managed futures, private equity, credit structures, infrastructure and real estate. Here he led a team that developed proprietary models for portfolio strategy and asset allocation with alternative investments, provided investment support and research to pension plans, sovereign wealth funds, endowments as well as internal clients including Citi Private Bank. Before this he was with Cambridge Alternative Investments and SunGard (System Access) where he travelled to over 80 countries for work across Europe, Asia, Middle-East and Africa. He has written over 30 academic and practitioner articles on alternative investments with thousands of downloads at SSRN, presented at over a hundred industry conferences and has coauthored a book, Active Equity Management. Mr. Jain has multiple degrees in engineering, management, public administration and policy and is a graduate of Massachusetts Institute of Technology and Harvard University. He is a recipient of the Alfred Sloan Fellowship and subsequently was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government for a year. He holds Series 7 and 66 securities licenses.

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