Achieving win-win spin-offs - Deepstash
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A corporate spin-off

A corporate spin-off

A corporate spin-off can set a parent company free from capital and bureaucratic constraints so that it can pursue alternative strategies.

Four factors are critical for creating successful spin-offs:

  • A quick transition toward growth
  • Operational excellence
  • Leadership time and attention
  • Culture and talent

Addressing some or all of these factors can increase the likelihood that strategic decisions will create value for both companies.

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A quick transition toward growth

Research shows that revenue growth is vital to determine a spin-offs success. The management teams of both ParentCo and SpinCo can often explain how growth is part of the spin-off's strategic rationale together with improved capital management and operational changes. But they are typically much less clear about how they will achieve growth.

A good idea is to achieve some quick wins to build momentum for the spin-off.

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67 reads

Operational excellence

Companies that successfully execute win-win spin-offs will optimise the operating model for both companies. 

For example, companies use the opportunity to increase their marketing expenditures or digitising the sales process. Others would attempt to improve, centralise, or simplify the operating structures before day one.

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Leadership time and attention

Companies often encourage spin-offs to free up management's time to refocus on the core business or launch a new business. But it can be difficult to focus on the big picture, particularly for the SpinCos executives who have to develop and execute new strategies.

Executives often spend more time focusing on the mechanics of spinning off units while missing the opportunities that they may unlock. They may wait until the spin-off is completed before preparing for the next step, resulting in being unable to capitalise on the momentum of the spin-off.

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Culture and talent

A core question in most spin-offs is how to allocate talent as each company wants to keep the best people. It is noted that successful spin-offs assess the cultures and capabilities each company would need to succeed.

Some identified critical roles that would create the most value and implemented a plan to find the right people for those roles.

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Thinker. Hipster-friendly coffee advocate. Infuriatingly humble organizer.

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