Focusing on a few key areas will ensure a successful transaction.
By Mary Chico, Director of Mergers and Acquisitions for Willis Towers Watson, an M&A Leadership Council partner organization
I was recently at a conference featuring a CEO who had just completed a corporate spin-off. He was asked what, if anything, he would have done differently. His response? “More decision-making; much earlier.” His answer was pretty telling, and aligned with what I’ve seen through our experiences helping hundreds of clients through mergers, acquisitions and divestitures of all types. Corporate spin-offs (the formation of a new company, by selling the shares of the old company) are most successful when you do a good deal of the work up front.
With that in mind, here are three tips to successful spin-offs from our experience, which were (not-so-coincidently) echoed by the CEO who spoke at the conference:
1. Separate the population within the business units.
It’s imperative to take time right up front to identify those employees (from executives to hourly workers) who are going with the spin-off and those who are staying with the parent company. From a business strategy perspective, leadership needs to segregate those people — and pinpoint who will have a foot in both organizations. The typical rule of thumb is that an employee who spends 60% or more of their time with the spin-off should go with that business unit. Read more.