Spin-off

economic-dictionary

Spin-off is an Anglo-Saxon term that defines the process by which a company arises from another existing entity. With the passage of time, the new company splits from the firm that acted as an incubator. Thus, it ends up acquiring both legal, technical and commercial independence.

We can define the spin-off as a business strategy that consists of promoting and supporting, from a large company, its own qualified workers to leave it and create their own company.

The spin-off includes those projects whose purpose is the independence of any of the departments or divisions of the organization.

Usually, the new companies that are born from the separation act in close collaboration with the original company in activities important to it.

It can be seen as a form of business restructuring or divestment. However, the fact of requiring subsequent collaboration between the parent company and the disbanded company makes us include the spin-off as a particular form of cooperation.

Spin-off classes

Based on their origin, two kinds of spin-off can be distinguished.

  • Business spin-off: As its name suggests, it refers to when the new company comes from another previous organization (whether public or private). To date, this type has been the most widespread case, with the support of CEEIs-BICs (European Business and Innovation Centers-Business Innovation Centers). These include entrepreneurs, mostly linked to start-ups. However, their business areas do not necessarily have to be technology-based.
  • Academic spin-off: It begins its journey within university centers and research institutes. This spin-off division is the most recent and is supported by the European Union through different programs with the aim of transferring the knowledge acquired at the university to the company. This is precisely the focus of the OTRIS (Research Results Transfer Offices) and their final product, the EBT or Technology-Based Companies.

Reasons

There are several reasons that can explain the creation of a spin-off:

  • The investment in human talent that will then continue to collaborate with the parent company.
  • The formation of new business niches and opportunities in the future of corporate activity.
  • Strategic survival in crisis processes of the company.
  • Tax, commercial or labor planning since, based on tax reasons, account consolidation, application of agreements or certain labor regulations, there are alternatives that bet on business segregation.
  • Finally, a specific financial dynamic that tries to raise funds to develop a certain business unit.

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