Unlocking value creation through spin-offs: the Electrolux case

This dissertation aims at thoroughly analysing corporate spin-offs as corporate restructuring transactions able to bring many financial and strategic benefits, hence allowing companies to pursue a sustainable long-term value creation for shareholders and to improve long-run operating performances. After an extensive literature review on corporate spin-offs, I provide the analysis of a case study, namely the Electrolux spin-off of Electrolux Professional, its Professional Products business area. In the first part of the study the purpose is describing the main features of the spin-off, the motivations and objectives underlying the spin-off decision, the spin-off process, the effects of the down-scoping transaction on the organizational structure of the Electrolux Group and the effects of the demerger on the equity of the parent company, Electrolux, and of the spun-off division, Electrolux Professional. In the second part of the analysis the main objective is investigating the effects of the spin-off on both short- and long-term stock-market performance, conglomerate discount, and long-run operating performance. The ultimate goal is understanding whether the transaction created value for shareholders and improved the performances of both the parent company and the spun-off division. I find positive abnormal returns on the announcement date accruing to parent company’s shareholders and strong value generation after the spin-off, which is driven mainly by the stock-market performance and the statistically significant operating performance improvements of Electrolux Professional, the demerged division.