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Market-Based Solutions to Vital Economic Issues
Research
Oct 27, 2017

Keys To Success In Spinoffs

Abstract

Corporate restructurings accomplished through spinoffs have long been a key tool for management to unlock shareholder value. In 2016, global spinoff volume reached $117 billion, and spinoff activity continues to unfold at a similar pace in 2017, with Hilton, Xerox, Alcoa, Johnson Controls, and Danaher all recently completing major transactions.

Spinoffs are often designed to increase strategic focus and discipline in the allocation of capital, enabling companies to respond more effectively to opportunities that create shareholder value, including transformational M&A. And intensifying shareholder activist pressure, along with favorable debt market conditions, has provided significant momentum to spinoff activity. In fact, almost 20% of the companies that announced spinoffs in the past five years were subject to some form of prior activist engagement. Moreover, part of the impetus for such activism can be traced to the record M&A volume of the past few years, which has added to investor demand for many acquisitive companies to consider shedding businesses that are no longer a strategic fit.


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