- The former parent company distributes shares in the new entity to its shareholders in proportion to their current investment in the former parent. This is essentially a property dividend.
- The former parent company sells the shares to the investment community.
- The managers of the new entity purchase the shares in a leveraged buyout.
Spinoff transactions typically occur because the corporate parent wants to streamline its operations to focus on specific business areas, or to eliminate business lines that are not overly profitable.