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Spin cycle: The rise of technology sector 'de-mergers'
The technology sector is continually being reshaped through merger and acquisition (M&A) activity. This article will present a brief history of technology sector divestiture activity; assess the spin-off value proposition; analyze the typical drivers of technology spins; present examples of notable spin-offs; and explore how digital disruption is creating opportunities for companies to use both spin-offs and sales to create shareholder value.
Years of experience with these types of engagements have produced a number of learnings addressed in the report. Suggestions for technology companies to carefully consider before they separate include:
- Developing a clear separation strategy and blueprint will help to align the operating model with the future vision of the two businesses
- Establishing robust and centralized governance can keep the separation and spin-off transaction process synchronized and on track
- Running the current business and the spin-off will require a significant number and mix of dedicated resources
- Limiting in-flight projects and an “all hands on deck” focus to succeed will likely be necessary to support a spin-off’s significant budgetary and personnel requirements
- Addressing employee engagement, retention, and morale is essential when planning any M&A transaction, including a spin-off
- Preparing for an issue-free separation includes proactive identification and minimization of “dis-synergies” and stranded costs to stay cost-competitive post-transaction
- Deciding on a spin versus a sale is not always clear-cut