Suggesting the breakup of a company is one of the most tried and true tactics activists have used to generate returns over time.
It’s not just activists that are seeking to split up companies to unlock value, companies themselves have been far more aggressive in the last few years at separating out disparate businesses from each other.
Communicating the story to the investment community produces a unique situation – both the SpinCo and RemainCo investment stories are often very different from the PriorCo story, and the IRO of any company facing this type of change needs to be prepared for both internal and external challenges. In the latest issue of the Better IR newsletter, we detail how several of Ipreo’s clients have gone through this process, with recommendations for both ongoing IROs as well as those that might go through such a transaction in the future.
A spinoff is one of the more complicated corporate actions on which management teams can embark. A critical part of the endeavor is the investor relations efforts around it, as the messages conveyed to the Street throughout the process will have an impact on sentiment. Accordingly, we interviewed several IROs who have been through the process to leverage their experience and expertise. As such, we came away with several key themes regarding best practices from the investor relations perspective:
- Corporate spinoffs require an immense amount of prep work from the investor relations team. The more work that is put into the process in advance, the more successful the spin will likely be for the company.
- Targeting and Risk analyses are critical for RemainCo and SpinCo, before and after the official spinoff.
- SpinCo’s management team will need a few trial sessions before hitting the road. Get them prepared!
- SpinCo’s investor relations team needs to know the intricacies of the new business and its peer group. Success has been seen from IROs who are new to investor relations but are veterans of the business, and vice versa.
- Questions directed towards the investor relations team will come in batches, internally and externally.
- The investor relations team for the parent company should be prepared for double duty through the completion of the spinoff.
Read the full piece, as well as articles about Proxy Access and Investor Voting Tendencies, Confidential Filings, our regular Firm and Fund snapshots (this issue focuses on AllianceBernstein, L.P. and Principal Funds – Largecap Value Fund), and a look at Milwaukee, WI’s suitability for investment, in the October Better IR.