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Chapter 17. Other Restructuring > The Rationale of Separate Listing of Units

The Rationale of Separate Listing of Units

As mentioned in previous chapters, corporate restructuring is driven by two main motivations: The first is the management's desire to improve the company's profitability and future cash flows; the second is management's desire to increase the market's awareness of the company's activities and value, i.e., to achieve value enhancement or value revelation. In many cases, the main activity is financial restructuring, for example, recapitalization by redeeming the company's public debt, changing the composition of the company's debt, and repurchasing the company's shares in the market. Another activity might be the changing of the company's asset composition, either by buying other companies or divisions of such companies, or by selling assets or divisions of the company, in order to maximize the company's shareholders' return in the short- and long-term, and to assist in increasing the capital market's awareness of the company.

The basic idea behind spin-offs is that listing business divisions separately facilitates a more optimized construction of investment portfolios by investors, their assessment of the company's value, and the compensation of employees in the unit. From the parent company's perspective, the spin-off mechanism also enables the company's management to better focus its attempts to maximize the performance of its core activities.


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