SPINNING TOPS
INVESTORS LIKE spin-offs, also known as starbursts. Infrastructure and reputations are in place and spun-off companies are expected to be worth more as independent identities. For owners and managers there are marketing as well as financial advantages in running an extra limb rather than a start-up. Businesses, large or small, don’t have to fade. New revenue streams may be there for the taking.
The new entity takes assets, staff, maybe product lines and technology, from the parent in exchange for a pre-determined sum. Multinationals such as Arconic, Electrolux and Prudential 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 more from what you have already.
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, identifying new or improved profit channels.
Investors want reliable products backed by proven expertise. Entrepreneurs seek controlled growth in broadly familiar arenas. Starbursts can satisfy both demands.
NEW BUSINESS
Technically, a spin-off occurs when a company takes a division or activity to create an entirely new business: one that can be sold, 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, inevitably. Financial, logistical and reputation traps have to be avoided and planned public relations techniques have a centric part to play.
Communicators are tasked with informing and persuading internal and external audiences. Messages shared with employees and other stakeholders have to be prepared and imparted in such a way that they will resonate with outsiders just as effectively. Mixed messages are likely to 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 spin-off announcement, management needs to take hold of any concerns that might arise and enter into open dialogue. This is fundamental business relations.
AMBASSADORS
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 employee or shareholder value. It cannot be presumed that people will know: without help, they won’t.
Ideally, each workforce and set of customers, suppliers and investors should know and be ready to accept their benefits in relation to those of the other group.
Successful businesses will have been employing public relations expertise long before the start of the spin-off 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 links with those many publics, size gains could mature significantly more quickly through spin-offs than via the launching of businesses from scratch.
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