Over the past several years, spun-off corporate subsidiaries have outperformed their parent companies and the broader market. If a corporate spin off may be part of your company’s future, you should be aware of the unique communications strategy that’s required and how to successfully execute that plan.
At the beginning of the spinoff process — which typically takes about six months — the parent company leads the communications efforts. But, once the deal is announced, much of the communication program shifts to the spinoff company (SpinCo). Each step of the way is critical to the success of the newly established company, and each step requires IR and communications skills, strategy and planning.
At the outset of the process, the parent company is responsible for establishing the narrative, articulating the spinoff’s purpose, what makes it different and better than its competitors, its financial growth prospects, and why it’s better off as a stand-alone entity.
Once the deal is announced, much of the communication program shifts to the SpinCo. For some brands that are already highly regarded and recognized — like PayPal, which was spun off from eBay — that transition is fairly straightforward. However, companies that have been more deeply hidden within the parent company must prioritize brand recognition.
The parent company’s investor relations team must analyze its shareholder base early in the process to estimate which major investors are likely to retain their new SpinCo shares, and which are likely to divest. Generally, most spinoff companies will see substantial shareholder turnover, so this will also begin the process of identifying and targeting alternative institutional investors whose investment criteria is better aligned with the SpinCo’s business.
Then, the parent and SpinCo management will begin to craft the spinoff’s story — who it is, what it does, its earnings history and the investment opportunity — to appeal to the type of shareholder base SpinCo management intends to build. Without the parent company’s brand equity, the SpinCo must establish its own long-term narrative, articulating the new company’s near- and long-term growth strategies, the markets it will operate in, and how the market will evolve over time.
Once the separation is complete, the SpinCo will trade as a standalone public entity. The SpinCo must now conduct earnings calls, identify key industry conference opportunities, secure media coverage, and schedule regular conference calls with investors and analysts to discuss and update management forecasts.
Each step of the corporate spin off process is critical — and each phase requires a specific set of investor relations and communications skills. By working with an experienced team of IR and communications professionals, you can ensure that your program keeps shareholders, employees, and other stakeholders excited about the prospects of the new, standalone company. A well-executed program will not only attract but keep long-term shareholders who believe strongly in your new company’s vision.
For a deeper look at how to develop a successful communications strategy around a corporate spinoff, download our guide, “Building a Strategic Communications Plan for Corporate Spinoff Success.”