What occurs when a part of a company is separated to form its own independent company?

When a part of a company is separated to form its own independent company, this process is known as a divestiture or demerger. In this context, a company that chooses to divest is essentially selling, distributing, or separating a portion of its business in order to focus on its core operations or to enhance shareholder value. This can involve creating a new, independent entity that may operate autonomously, enabling the parent company to streamline its operations and potentially improve financial performance.

Spin-offs are a related concept but are distinct in that they often involve distribution of shares of the new entity to existing shareholders rather than a sale or divestiture. The key aspect of a divestiture is more about the separation process itself, which can take various forms, including the outright sale of assets or the formation of a new company from existing operations.

Mergence is not a recognized term in corporate restructuring; it may be a confusion with "merger," which involves combining two companies rather than separating them. An acquisition refers to one company purchasing another, which also does not align with the concept of forming an independent entity from within a larger corporation. Thus, the term that accurately captures the action of separating a division or part of a company to create an independent