Spin-offs in an Environment of Bank Debt

: An assessment of the wealth impact of spin‐offs involving UK firms is of interest, as they tend to access debt through banks rather than capital markets. Banks will have a different relationship with shareholders, so the distribution of returns may differ from that previously observed. The short and long‐term impact on both parent and spin‐off shareholders is investigated. Possible reasons for a positive returns response, including an anticipated acquisition premium, and management focus related gains, are considered. Annual financial ratios offer a further evaluation of operating performance and assess the impact on levels of leverage in parents and spin‐offs.