At first blush, the decision of an investment professional or team to spin out from a PE firm could be perceived as reflecting tension between the two parties. The reality is that there are many possible explanations for spinouts to occur (e.g., style drift, ambition), most of which mutually benefit the legacy firm, spinout manager and, most importantly, investors. Simply agreeing to proceed with a spinout is merely the first step, however, as the parties need to navigate a lengthy and fraught road of considerations, negotiations and processes to effectuate the arrangement. This first article in a three-part series explains what PE spinouts are, why parties pursue spinouts and what factors impact the timeline for a spinout. The second article will explore some obstacles that legacy firms and principals who are spinning out need to navigate to complete a spinout, including as to track record portability and non-solicitation clauses. The third article will detail some of the economic and operational terms negotiated as part of the ongoing relationship between the two entities, as well as certain post-spinout complications that arise. For more on the departure terms of management company and GP agreements, see our two-part series: “Governance and Economic Terms” (Oct. 20, 2020); and “Non-Competes and Principal-Departure Parameters” (Oct. 27, 2020).