The term for forming a new company from part of an existing company is

The term for forming a new company from part of an existing company is

• A. Divestiture
• B. Spin-off
• C. Merger
• D. Acquisition

Answer: (A)

Spin-off is the term for creating a new, independent company from a portion of an existing business. In a spin-off, the parent company establishes a separate entity from part of its operations and distributes shares of the new company to its current shareholders, resulting in two independent companies—the original parent and the new firm. This differs from a divestiture, which typically means selling off a unit to another company and exiting that business, rather than forming a new standalone entity. Mergers and acquisitions involve combining with or purchasing another company, not creating a new company from a part of the original. For example, if the parent spins off its electronics division into a new company, shareholders get stock in the new firm, and the parent retains its remaining business.

Spin-off is the term for creating a new, independent company from a portion of an existing business. In a spin-off, the parent company establishes a separate entity from part of its operations and distributes shares of the new company to its current shareholders, resulting in two independent companies—the original parent and the new firm.

This differs from a divestiture, which typically means selling off a unit to another company and exiting that business, rather than forming a new standalone entity. Mergers and acquisitions involve combining with or purchasing another company, not creating a new company from a part of the original. For example, if the parent spins off its electronics division into a new company, shareholders get stock in the new firm, and the parent retains its remaining business.