Tim Human’s monthly M&A column
Breaking up’s not so hard to do, noted IR magazine’s December 2011 cover as it reflected on the increasing number of spin-offs taking place.
That trend is set to continue throughout this year, driven in part by activist investors. The global value of spin-offs is predicted to increase from £130 bn ($206 bn) in 2011 to £250 bnin 2012, a rise of 92 percent, according to new research from Deloitte and specialist research company the Spinoff Report.
Ryan Mendy, the Spinoff Report’s COO, says the jump is down to the challenging economic environment, which is making it hard for companies to grow, coupled with demands from investors for more shareholder value.
He points to a number of vocal investors taking the case to management for change, such as Paulson & Co and Jana Partners.
Paulson has called for a break-up of Hartford Financial Services, citing the insurer’s poor stock performance and low multiple. But it is Jana, in particular, that has been busy.
The fund, founded by former banker and private equity boss Barry Rosenstein, took a stake in El Paso last spring, soon before the firm announced it would split in two.
It then teamed up with the Ontario Teachers’ Pension Plan to call for a four-way break-up at McGraw Hill. McGraw later said it would divide, but only in two.
And the activity hasn’t died down in 2012. In January Jana disclosed a 5.5 percent stake in Marathon Petroleum and said it was in strategic discussions with management.
The target, itself a spin-off from Marathon Oil last year, has since announced it would explore an IPO of its pipeline assets. Jana is also pushing for changes at TNT Express, the Dutch delivery service, where it wants a shake-up of the board.
While spin-offs result in a lot of hard work for IR staff, they also present new employment opportunities. With the IPO market still in intensive care, job vacancies at newly listed companies are thin on the ground.
As a result, it is the post-spin-off corporate segments that offer new positions. By way of example, as IR magazine was going to press, Tyco’s head of investor relations Antonella Franzen said the company was at an advanced stage of filling the IR posts at the three public companies into which Tyco will soon transform.
