GOING FOR A SPIN
SPINOFFS from established companies are attractive to investors because of the in-place reputation, infrastructure and credentials of the parent. For owners and managers there are marketing as well as financial advantages in running an extra limb rather than a start-up. Businesses, whether large or small, don’t have to fade. New and profitable revenue streams may be there for the taking.
Multinationals such as AOL, eBay, Kraft Foods and Xerox are some of the innumerable corporations to have taken this route in recent times.
At a more modest level, many a farmer has split off holiday cottages or a retail meat outlet; automotive service centres have created separate car dealerships; and management consultancies have emerged from accountancy practices. It’s a case of making the most of what you have.
All have listened to their customers. More than likely, they’ve monitored trends, studied competitors and involved marketing and PR specialists. Marketplace intelligence will have been combined with deep seated knowledge to identify new or improved profit enhancing channels.
Investors want reliable products backed by proven expertise. Entrepreneurs seek controlled growth in broadly familiar arenas. Offshoots can satisfy both demands.
POPULAR
Technically, a spinoff occurs when a company takes a division or activity to create an entirely new business: one that can be sold in return for a lump-sum benefit, opened up to inward investment, or retained under full control. Anyway around, this is a popular business procedure for organisations of all sizes.
There are dangers. Financial, logistical and reputation traps have to be avoided and planned public relations techniques have a centric part to play.
The communicators are tasked with informing and persuading internal and external audiences. Messages shared with employees and other stakeholders should be prepared and imparted in such a way that they will resonate with outsiders just as effectively. Mixed messages can be entirely counter productive.
Staff must be helped to understand why changes are occurring, how they will be affected and what might be expected from them. These factors have relevance for more distant parties, too, and will help mitigate potential risks.
After the spinoff announcement, management needs to take hold of any concerns that might arise and enter into open dialogue. This is fundamental PR.
IN THE LOOP
By keeping employees in the loop they are far more likely to serve as ambassadors for the enterprise – and be armed with the correct information to do so.
The originating company should be ready and able to focus on how the split is part of a long-term business strategy. It needs to be willing to explain aspects such as the reasons for entering new markets and to outline the implications for employee or shareholder value. It cannot be presumed that people will know.
Ideally, each workforce and set of customers, suppliers and investors should know their benefits in relation to those of the other group.
Of course, forward looking businesses will have been employing public relations expertise long before the start of the spinoff evolution. PR is compulsory. The only choice concerns how to direct its effect.
Ultimately, growth is essential for increasing value. Supported and protected by the right kind of communications with those many publics, size gains could mature significantly more quickly through spinoffs than via the creation of businesses from scratch.
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