Spinoffs and Carveouts: Some Factors Leading to Successful Divestiture
This paper tests the anecdotal literature related to the reasons that lead to a successful outcome (by reducing failure rate) of corporate divestitures, specifically, spinoffs, carveouts, and carveouts-to-spinoffs. Four variables were tested: 1.) focus industry concentration; 2.) revenue size of parent; 3.) revenue size of spinoff/carveout; and 4.) divestiture reasons. Parent size and revenue size together comprised an unquestionably significant influence on failure rate for these divestitures. Parent size alone and revenue size alone were also unquestionably significant. Therefore, larger parent size and larger revenue size of the divestiture does matter in creating a successful outcome by reducing failure rate. Industry concentration focus and divestiture reasons were significant, but to a lesser extent in comparison to parent size and revenue size.
Cristo, D. A., & Falk, R. W. (2006). Spinoffs and carveouts: Some factors leading to successful divestiture. Competition Forum, 4(2), 331-347.