Unlocking the potential of win-win spin-offs can be a game-changer for businesses. It's about leveraging synergies, fostering innovation, and creating value for all stakeholders. Let's delve into the strategies and practices that make these beneficial spin-offs a reality.
Four factors critical to achieving win-win spin-offs
A quick transition toward growth
- Operational excellence
- Leadership time and attention
- Culture and talent
- By reviewing and addressing some or all of these factors, business leaders can increase the likelihood that any strategic decisions ParentCo and SpinCo make will ultimately create value for both
Leadership time and attention
Companies frequently pursue spin-offs to free up management’s time and bandwidth to refocus on the core business or launch a new one.
- In our experience, many executives spend more time focusing on the mechanics of spinning off units than on opportunities that deals may unlock or communicating those potential benefits to stakeholders.
Culture and Talent
The most successful spin-offs don’t approach this as a zero-sum exercise
- Instead, they take the time to assess the cultures and capabilities each company will require to succeed in the long term
- They identify the critical roles that create the most value in the new organization and develop and implement a plan to find the right people to fill those roles
A quick transition toward growth
In most cases, the management teams of both ParentCo and SpinCo can adequately explain how growth is part of the spin-off’s strategic rationale, alongside improved capital management and other operational changes.
- But management teams are typically much less clear about how they will achieve growth. Understanding that “how” is crucial for achieving win-win spin-offs.
About the Author(s)
Jan Krause, Anthony Luu, Robert Uhlaner, and Andy West are partners at McKinsey & Company
- The authors thank Roerich Bansal, Lukas Brink, Manny Fragata, Mohsin Imtiaz, and Rohan Singh for their contributions to this article.
Operational excellence
Companies that successfully execute win-win spin-offs tend to optimize the operating model for both ParentCo and SpinCo
- In some cases, companies saw these deals as an opportunity to bolster their operations in high-growth areas
- Before the spin-off, the parent company initiated a series of actions to streamline its businesses
- This helped prepare SpinCo to compete effectively as a stand-alone organization
