Barely a month goes by without a major company announcing that it is breaking up its business into spun-out public companies. Kellogg, GSK, Johnson & Johnson, General Electric, and IBM all recently made such announcements. While it is too soon to predict the effectiveness of any single recently announced deal, this intensified focus on separations raises some critical questions about the value created from a spin-off. What is it that these companies are hoping to achieve? What challenges will they face? How will they create shareholder value in light of these challenges?
Research: Few Corporate Spinoffs Deliver Value
Here’s what the best-performing ones do differently.
December 20, 2022
Summary.
Large companies routinely spin off existing units to become public companies of their own, in an attempt to focus management attention and capture larger multiples in equity markets. An analysis of 350 large spinoffs from 2000 to 2020 reveals the average one creates negligible value. A study of the best-performing separations concludes that to succeed, leaders must create a compelling separation thesis, one that consists of four parts: an equity story, target financials, an asset perimeter, and program design.
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Sharpening Your Business Acumen Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Sharpening Your Business Acumen. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
Take your career to the next level by learning business and finance basics, and developing an enterprise mindset.