Are Product Spinoffs Good for Companies?

When a company has multiple products, should they keep them all together under one roof or split them into different businesses?  What is the better option?

Usually, when a company has different products, they set up a holding company. Each product becomes its own company, but they’re all owned by the same group of people.

Advantages of Spinoffs for Companies:

Tailored Ownership Structures

If different people own parts of the company or if one product needs a lot of investment, it’s better to spin off products. This makes ownership and the financial risks clear.

Separated Risk Profiles

If the products have different levels of risk, it’s wise to keep them separate. This protects the company in a case where the problems with one product affect the others.

Protected Asset-Rich Businesses

Companies with lots of valuable stuff, like real estate or patents, should often split them into different businesses. That way, if one thing goes wrong, it doesn’t hurt everything else.

Seeking Professional Guidance

Whether to keep products together or split them up, depends on various factors, such as risk, ownership, and the company’s valuable assets. Consulting a lawyer who knows how to handle these issues can help you make the right choice. 

Watch the full video if you’re ready to make informed decisions about your company’s structure.

Explore more insights on spinoffs and business strategies on our YouTube channel at https://www.youtube.com/@surgelaw.