When subsidiaries fail on their own, how do you bring them back into the fold?
It's not hard to see why companies spin off units. Last year, while the Dow Jones Industrial Average lost more than 6 percent, telecommunications firm Comverse Technologies spun off its Ulticom Inc. software subsidiary for more than $200 million. IPO investors racked up returns exceeding 60 percent for the year.
Spinoffs can be excellent tools to tap value latent in a subsidiary or business unit, according to J. Randall Woolridge, finance professor at Pennsylvania State University in University Park and co-author of Spin-Offs and Equity Carve-Outs (Financial Executives) with Penn State colleague James Miles. They can also help the units grow faster and improve profitability.
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