Divestitures & Spinoffs
“New fuel for growth, shed the weight of past.”
Divestitures and spinoffs are not talked about as traditional M&A activity like buying and selling, but these tools serve as incredible Transition Points if you know how to use them. Divestitures and spinoffs can be leveraged as part of partner conflict resolutions, but they can also be great tools for to accelerating thriving businesses.
Many law firms don’t have a concerted focus on divestitures and spinoffs, but Transition Point Law is no normal law firm. Here are some of the most common reasons to engage our help with a business spinoff/divestiture:
- Reducing debt or raising capital: Divestures are a great way of generating non-dilutive capital. And with a spinoff, the parent company can sell shares of the newly created entity, generating cash.
- Simplifying the business: Complex corporations with diverse business lines can sometimes be cumbersome to manage. A spinoff or divestiture can streamline operations by focusing on core competencies and allowing the spun-off entity to operate independently with its own strategic direction.
- Improving operational efficiency: Different business units within a company may have different growth trajectories. Spinning off a unit allows each entity to tailor its operations and decision-making to its specific needs, potentially leading to improved efficiency and performance.
- Strategic reasons: Sometimes, a company may decide that a particular unit no longer fits its overall strategic direction. Other times, a subsidiary or division within a larger company may be undervalued by the market due to being overshadowed by other parts of the business. Spinning it off creates a separate entity that can be valued on its own merits, potentially attracting more investment and achieving a higher valuation than if it remained under the parent.
