War has The Art of War; company splits need The Art of Spin. That’s because like war, spinning a company requires war-like planning, guile and strong leadership.
One goal should be to get as much of the job done pre-split as possible, which makes it all easier in the aftermath. That was one takeaway from The NeuGroup’s spring Tech20 Treasurers’ Peer Group meeting last spring. One member at the meeting discussed his company’s approach to spin-offs. He noted that the company reassigned a team that was starting work on an effort to create an optimal treasury and shared-service platform to the separation project. While that project was put aside for the company separation, having a team attuned to optimization tackling the creation of two treasury and shared-services platforms for the post-split companies heightened the chances that some progress will be made pre-split, or at least the structures created will be better able to accommodate anticipated changes post-split.
Another takeaway: do go all pie in the sky. Despite hopes to optimize to the furthest extent, the urgency of the established time-line requires decisive actions that don’t wait for democratic consensus and that don’t let optimization get too much in the way. That’s why it’s critical to create an empowered separation committee with a strong chairman/leader, but also clearly delegated authority to prevent too much escalation, in order to keep the project moving. To that end, it’s good for split planners to keep this mantra in mind as they strategize: “Separate quickly, optimize later.”
An overarching authority also helps. Similar to the top-down mandate to focus on separation actions vs. thinking about what might be best, the governance structure put in place for a separation, including PMO outsourcing and the use of any consultants required, point out how much can get done if it really has to. Taking advantage of this mindset to boost the growth potential of the company post separation is something to keep in mind. Indeed, boosting the “can-do” attitude of governance should be considered at the top when reshaping and upgrading the board in preparation for splitting it on down to each level of management.
Another one of the clear takeaways from the spin discussions was the importance of communication. Too much valuable time gets lost, even if there is a well-thought-out frame-work of working groups and steering committees to execute the transaction, when people think they are on the same page regarding what should be getting done, but are really not. “You want to communicate both clearly and in a timely fashion in order to avoid the rumor mills from mushrooming,” as one member noted. You also want to focus on your staff and give them their transition and future job descriptions as early as you can: you will need them.
Since one of the key lessons is to start early — especially in treasury because it has so much more to do than other functions (like create two different capital structures) — it might make sense to plan a bit before a transaction is known. There can be signs that the strategic plan involving synergies with distinct lines of business is not paying off. Taking the work and tight timelines of a separation to heart, treasury should consider having a contingency plan or two on the shelf for when a transaction or other transformational event creates or forces a change opportunity. It can also help to have clear documentation of roles, responsibilities and processes.