Spinoff
Distribution of a subsidiary's shares to existing shareholders, creating an independent publicly-traded company.
Scenario items rarely ask you to define a spinoff; they hand you a vignette and make you name the form or predict the cash effect. The decisive tell is the cash flow: a spinoff and a split-off raise no cash for the parent, whereas an equity carve-out (minority IPO) and a divestiture/outright sale do generate cash. If the prompt mentions IPO proceeds or a sale price, it is not a pure spinoff. The other classic trap is the split-off: because shareholders tender parent shares to receive subsidiary shares, the parent’s outstanding share count shrinks (like a buyback) — in a spinoff there is no exchange, so the count is unchanged.
Do not conflate any of these with mergers/acquisitions, which are combinations bought at a premium that empirically often destroys acquirer value (the winner’s curse) — the opposite direction from a value-unlocking demerger. (The deeper M&A and restructuring mechanics sit in the Level II Corporate Restructuring reading.) Memory hook: spin-OFF = ship shares OFF for nothing; carve-OUT = carve cash OUT via IPO.
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