Corporate spin-offs are set to increase by 92 per cent to £250 billion in 2012, research finds.
Corporate spin-offs are set to increase by 92 per cent to £250 billion in 2012, research finds.
While 2011 saw £130 billion worth of company divisions becoming independently listed businesses, 2012 is set to see a surge from the natural resources and consumer goods sectors creating spin-offs, according to research from accountancy firm Deloitte and corporate adviser The Spinoff Report.
Statistics show that European companies have already announced spin-offs worth £10.5 billion for 2012, with another £131 billion worth in the pipeline.
George Budden, partner in the Post Merger Integration Team at Deloitte, comments, ‘Companies thinking about a spin-off need to ensure they plan the execution process early. It takes six to nine months to prepare a business for a spinoff and in our experience companies are always more connected to the parent than initially at the outset.
‘Thus it is important for businesses to factor such time delays into the process.’
Nearly a quarter (24 per cent) of spin-off activity is projected to come from the basic materials sector due to the ‘cyclicality of fully valued businesses within the sector’ and the current high price of commodities.
Consumer goods and services are set to contribute 22 per cent of new spin-offs. The report concludes that businesses in the sector are coming to the conclusion that with help from the parent entity, individual divisions can perform much more efficiently as standalone entities.
Ryan Mendy, COO at The Spinoff Report, says that investor appetite for spin-offs is growing due to austerity measures having an adverse effect on companies’ plans for growth.
He adds, ‘Management boards across all markets and capitalisations are seeing their outlooks and strategies being challenged by increasingly vocal investors seeking greater transparency and shareholder value.
‘Unless heavily incentivised, both institutional and private investors are more and more unwilling to aid traditional-style corporate restructurings, such as IPOs, on yet to be proven strategies.’
