Technology spinoff 2015

Analysis

Technology spinoff

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:

  1. Developing a clear separation strategy and blueprint will help to align the operating model with the future vision of the two businesses
  2. Establishing robust and centralized governance can keep the separation and spin-off transaction process synchronized and on track
  3. Running the current business and the spin-off will require a significant number and mix of dedicated resources
  4. 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
  5. Addressing employee engagement, retention, and morale is essential when planning any M&A transaction, including a spin-off
  6. Preparing for an issue-free separation includes proactive identification and minimization of “dis-synergies” and stranded costs to stay cost-competitive post-transaction
  7. Deciding on a spin versus a sale is not always clear-cut
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