Parent companies have no need to fear separation anxiety when they spin-off units because the new standalones far outperform the Standard & Poor’s 500, says Lehman Brothers. Recent research at Lehman found that for the past 15 years, shares of spin-offs and their parents were 13% higher than the S&P500 in the first year of operation and 18% greater in the first two years. The reasons? Spin-off candidates, Financial News suggests, are usually units that are strong performers and most likely to succeed on their own, with its managers driven to do well. The parent also benefits as investors view a future spin-off as a way of improving the business.
