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Midwest Laboratories Spin Off Case

580 Words3 Pages

On January 01, 2013, Abbott Laboratories spin off its one of the businesses (pharmaceutical business) into a completely new publically traded company: AbbVie Inc. The new company was expected to be the key growth driver for the parent company. There was a spin off because of many reasons. According to the chief executive officer of the company, Miles White, it was more of a fundamental change. The pharmaceutical sector is quite risky given the fact that there is huge volatility in the cash flows for the company. Due to the patents and other such intellectual property issues, the company is never termed as stable and hence the parent company has the risk of losing the path in the midway. But there was a risk too because of this. Most of the cash flow for the parent company comes from the pharmaceutical business and hence a spin off might mean lowering of cash flows and the impact could be seen in the top and the bottom line for the company. …show more content…

Sometimes, it is considered to be one of the most successful [spinoffs] in the market. At the time of the spin off there was a huge capital crunch for the company. They needed huge capital inflows for their main business and hence to maintain the core competency in the business they spin off the business. This is in contrast to many of the businesses in the industry who try to sell off their business segments. But as per the CEO of the company for the same you would need to look out for the buyer in the market and then agree to a price which is quite difficult than the spin

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