Literature about Corporate Spin-Offs is scarce, and the available definitions are heterogeneous. In a broad sense, a Corporate Spin-Off process is the division of an existing company into two, usually a bigger one (the parent company) and a smaller one (the Spin-Off). The process consists of three phases, the decision phase, the separation phase and the post-separation phase. The decision phase includes all factors leading to the decision to spin-off. The separation phase comprises the strategic and organisational separation of the two companies. The post-separation phase starts with the independent operation of parent and Spin-Off and ends when no more preferential agreements or relations between parent and Spin-Off exist.

The persons, assets and intangibles transferred from the parent company constitute a key-element of the Spin-Off’s core-business. Corporate Spin-Off processes imply profound changes in ownership, responsibility and liability for the Spin-Off’s activities. The aims of the Spin-Off process determine how the process is initiated, implemented, perceived and evaluated.

                    Figure 1: The Corporate Spin-Off process

Depending on the motivations behind the Corporate Spin-Off process, two types can be distinguished:

1. Restructuring-driven Spin-Offs are initiated by the parent company for strategic or operational motives related to the parent company. They are often the consequence of restructuring or refocusing activity of the parent company.
2. Entrepreneurial Spin-Offs are driven by one or more individuals (Spin-Off entrepreneurs) who want to exploit an unused potential based on their experience acquired within the parent company.

These two types are presented below.

                                                        Figure 2: Entrepreneurial vs. Restructuring-driven Spin-Offs

Restructuring-driven Spin-Offs can be regarded as a top-down process, because the origin of the decision and the driver of the process is the parent company. Research on 85 US Corporate Spin-Offs revealed the following effects of the Spin-Off process on the parent:

• Excess share price improvements for the parent company around the announcement date of the Spin-Off.
• ROA (Return On Assets) improvements by 3 % for cross-sectorial Spin-Offs for the years following the process. These improvements are more associated with the parent than with the Spin-Off company.
• Parent firms exhibit substandard operating performance prior to the Spin-Off process. Afterwards, their performance improves to about average levels.

These characteristics make the Spin-Off option an increasingly important part of parent-corporate strategy.

In contrast, entrepreneurial Spin-Offs are bottom-up processes, where the origin of the decision and the driver of the process is the Spin-Off entrepreneur. In comparison to other start-ups, Corporate Spin-Offs combine considerably lower failure rates with the high growth of a new (or refocused) company. It seems that there is a strong positive correlation between the complexity and specialisation of the Spin-Off’s business and the Spin-Off entrepreneur’s previous key-experience in the field. Together with the rising availability of venture capital in many European countries, more and more entrepreneurial personalities take the initiative to form a Spin-Off.