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Fallen Branches

When subsidiaries fail on their own, how do you bring them back into the fold?

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This story appears in the November 2001 issue of Entrepreneur. Subscribe »

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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