How to successfully split off companies

Categories: transactionsPublished On: 24.05.2019

Many major companies are fundamentally changing their business models by focusing on lucrative core business functions and splitting off less profitable business units. Here’s how you can use the acondas TWO® approach to turn carve-out projects into a successful strategic tool when it’s time to separate what doesn’t fit anymore.

Rudolf-August-Oetker, patriarch of the custard-powder-dynasty from Bielefeld, who died in 2007, was an advocate of diversification. His credo when it came to risk management was: “Never put all your eggs in one basket”. As a result, the Group was active in a variety of business areas stretching from producing pizzas, ready-mixes, wine and beer to running the second largest container shipping company all the way to operating hotels as well as a private bank.

Nowadays, the concept of an integrated conglomerate is seen as outdated. More and more companies are focusing on their core businesses and splitting off areas considered non-core. In 2004, Bayer let go of its chemistry division, which now does business independently as Lanxess. In 2015, its polymer materials production went public as Covestro. Just last year, Siemens parted with its medical technology business, now named Healthineers, and E.ON. did the same with its traditional energy producer which is now called Uniper. This year, Siemens will spin off its Operating Company Gas and Power for which it is planning an IPO in 2020. And even Oetker has cut ties with its former container shipping company.

The reason for these so called carve-outs is usually the lack of synergy between different business units. Moreover, big conglomerates are too slow for the global market. That is why capital markets do not like conglomerates dealing in discounts, which attract activist investors. In the case of ThyssenKrupp, hedge funds Elliott and Cevian are pushing for a carve-out and have been pressuring management for months already.

Regardless, carve-outs are no trivial matters. They can fail or fall short to deliver on expectations when the new business case of the carved-out entity is not clearly defined, when disruptions to the business activities of the mother company occur, when the carve-out is delayed due to high complexity or when issues linked to employees and culture are neglected. Our acondas TWO® approach with the sub project areas

–    TWO Businesses for separating business models

–    TWO Entities for separating companies

–    TWO Employers for transitioning employees and culture

–    PCM for managing the project

targets these four pitfalls specifically.

Figure: acondas TWO®-Integration approach

The sub project area TWO Businesses is about defining a new business model for the carved-out entity, distinguishing it from the former business model within the mother company and the relationship between both. Parts of this process include strategic analyses about possible future business options and their value chains, defining clear goals and the corresponding roadmaps as well as an accurate documentation of the carve-out process.

The sub project area TWO Entities lays out in detail how the separating process of mother company and the entity to be carved out will take place, which individual implementation steps will be taken and what timeline the separation will follow. This is necessary due to the usually deep entanglement of mother company and the unit to be carved out. To prevent production lines from coming to a halt due to insufficient pre-production, all steps of a carve-out including potential problems are simulated in workshops. Additionally, an overarching support concept is established, providing another layer of safety.

A particularly sensitive area during both mergers and carve-outs are employees and company culture. These areas are so impactful that entire projects sometimes fail if they are not dealt with properly. The sub project area TWO Employers controls these risk factors by providing a detailed plan outlining which employees will be transferring to the new company and which tasks they will be taking over. To prevent frustration among affected employees, opportunities for personal development to counteract possible negative impacts of the carve-out are provided. Additionally, developing an independent vision and own culture as well as creating a new brand is crucial for the success of a carve-out project since it helps all employees to identify themselves with the new company.

Finally, overarching project and change management forms a roof over the other three sub-project areas. The responsible team develops a precise roadmap including goals and timeline, and outlines responsibilities as well as KPIs and budgets. Furthermore, it ensures close communication as well as detailed documentation of all project steps during the carve-out to ensure that all important tasks are undertaken, and that mistakes and misunderstandings are avoided during the implementation.

In summary, the integrated acondas TWO® approach ensures that carve-out projects deliver on their expectations while preventing mistakes when it’s time to separate what doesn’t fit anymore.

If you have any questions concerning the acondas TWO® approach or our expertise in the area of carve-outs, feel free to contact us at

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