New equity assets development (spin-offs, split-offs, cave-outs, digitized products, and programs)
So, you run a company that now has multiple shareholders – sweet equity partners or investors?
.. And you are interested in increasing your shareholders’ value while pursuing your desire to focus your efforts only on your core competencies, yes?
When our client’s business grows, often through diversification, eventually the time comes for us to suggest a spin-off, split-off, or carve-out as methods for a company to divest certain assets – partially or fully dispose of a business unit through the sale – a division, or a subsidiary. While the choice of a specific method will depend on several factors, the ultimate objective of our consulting efforts is to increase your shareholder value.
Often our client business doesn’t yet have such division to sell, yet overall business initiatives are quite diverse and present an opportunity to:
- package certain offerings,
- develop them as independent assets and
- sell them as separate ventures with high ROI.
DIGITOMIZATION stands for:
- Optimization
- Automation
- Productization
- Digital transformation
And no, it’s not only for large enterprises. Small and medium businesses can benefit from this value creation and wealth building strategy.
Do you know how many unmonetized assets are hidden in your day-to-day operation?
Let us help you do discover, package, and monetize your hidden assets for you.
Want to learn more about opportunities spin-off, split-off, carve-out, or digital assets development present for you?
Here is a quick overview….
Spin-Off
In a spin-off, your company will distribute shares of the subsidiary (or a unit that we will identify, form, and package for you) to its existing shareholders. Hence, they benefit by now holding shares of two separate companies after the spin-off, instead of one.
We can help you:
- position one of these companies for acquisition,
- pitch its premium value and
- work with an investment bank to sell it to the highest bidder.
The spin-off is a distinct entity from the parent company and has its own management that we can help you recruit and onboard. The parent company may spin off 100% of its subsidiary shares, or it may spin off 80% to its shareholders and hold a minority interest of less than 20% in the subsidiary.
Historically speaking, most spin-offs tend to perform better than the overall market and, in some cases, better than their parent companies.
Split-Off
In a split-off, your company will offer your shareholders the option to keep their current shares or exchange them for shares of the divesting company. In some cases we may suggest you provide a premium for the exchange of shares to promote interest in shares of the new company.
A split-off is a type of business reorganization method that is fueled by the same motivations of all divestitures in general. The main difference in a split off vs. other divestiture methods is the distribution of shares.
With a split-off type of divestitures, your company can create greater value for your shareholders by shedding assets and providing the new company an opportunity to operate independently.
A split-off is generally accomplished after shares of the subsidiary have earlier been sold in an initial public offering (IPO) through a carve-out. Since the subsidiary now has a specific market value, it can be used to determine the split-off’s exchange ratio.
To induce parent company shareholders to exchange their shares, an investor will usually receive shares in the subsidiary that are worth a little more than the parent company shares being exchanged. For example, for $1.00 of a parent company share, the shareholder may receive $1.10 of a subsidiary share. The benefit of a split-off to the parent company is that it is akin to a stock buyback, except that stock in the subsidiary, rather than cash, is being used for the buyback. This offsets part of the share dilution that typically arises in a spin-off.
Carve-Out
If you need to further capitalize on your business operation, raising funds using carve-out as a vehicle is one of the many strategies we help our clients execute.
You can use a carve-out approach as a partial divestiture of a business unit in which your company will sell a minority interest of a subsidiary (carved-out unit) to outside investors. A company undertaking a carve-out is not selling a business unit outright but, instead, is selling an equity stake in that business or relinquishing control of the business from its own while retaining an equity stake. A carve-out allows a company to capitalize on a business segment that may not be part of its core operations.
A carve-out is similar to a spin-off; however, in a spin-off, a parent company transfers shares to existing shareholders instead of new ones.
A carve-out will effectively separate a subsidiary or business unit from your parent company as a standalone venture. The new organization has its own board of directors and financial statements. However, the parent company usually retains a controlling interest in the new company and offers strategic support and resources to help the business succeed. Unlike a spin-off, the parent company generally receives a cash inflow through a carve-out.
- Need to come up with creative strategies to raise expansion capital?
- Looking to create more shareholder value?
- Keen to productize some of your internally used process-oriented know-how?
Let us help!
Digital product & equity assets development
Yes, we can spin for you!
We can productize your expertise, and turn your service company into a technology plus service company….
…so you can sell not only your service, but also the company itself…
…and with much higher $ multiple than any service company can be sold.