How to Deal with Equity Holdings During a Spin-Off

How to Deal with Equity Holdings During a Spin-OffZoom inDownload PDF

In today’s corporate environment, many companies face increasing pressure to deliver strong returns year in and year out. This pressure can be the catalyst for strategic business conversations that lead to acquiring, consolidating, divesting, or spinning off businesses. Executing a spin-off creates an opportunity to unlock company value — value that is based on the belief that the separation of two businesses into stand-alone entities will create more value than a single business can deliver. Some notable and successful spin-offs include PayPal from eBay, Kraft Foods from Mondelez International, and Synchrony Financial from General Electric.

Each restructuring event has a unique set of compensation and benefits challenges from a philosophical standpoint (e.g., defining a new rewards strategy) and a tactical standpoint (e.g., modifying existing incentive awards held by employees).

A company intent on spinning off a business may encounter the most complex challenges as it determines how to structure the pre– and post- spin organizations and how to create compensation and benefits programs from scratch for the spin company.

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