Business spin-off in IT
In the IT segment, not only startups have gained popularity in recent years, but also the so-called corporate spin-offs. These have become a popular way for companies to multiply their value and business potential and to focus on new business goals. Much of the popularity of business spin-offs can be attributed to the advantages that this way of doing business offers: spin-offs have the material and personnel support of the parent company, but at the same time they create an innovative environment for the growth of ideas that have been hampered by circumstances and the functioning of the old environment. This is the path we have chosen in the creation of our spin-off project SOLVEDIO.
Spin-off is a type of corporate mechanismwhereby a company 'spins off' a section of its business as a separate enterprise or creates a second enterprise even though the parent business is still active.Business spin-off is thus a mechanism for separating a division or area of business from the parent company. The spin-off becomes an independent company with assets, employees, intellectual property, technology or existing products that are taken over from the parent company. The management team of the new company is many times from the same parent organization. Spin-offs often offer an opportunity for the division to be supported by the company but not influenced by the parent company's image or history.
What is a business spin-off?
The process of spinning off a spin-off business happens especially when a company has a division or section with a lot of potential that is not exactly related to its core competencies, and putting it under a separate brand, ownership and management allows both the parent company and the spin-off company to focus on what they do best.
In most cases, the parent company or organisation offers spin-off support for one or more of the following activities:
- Investing equity in a new company;
- Be the first customer of the spin-off and support its development;
- Provision of "incubation" space (facilities, technological equipment...);
- Provision of legal, financial or technological services.
SOURCE: cepymenews.es
All support from the parent company is provided with the clear objective of helping the spin-off business to grow. Successful technology spin-off businesses are mainly based on narrowly focused technologies (which have a specific product technology rather than a broad technology platform), sufficiently distinct from the technical knowledge base of the parent company.
Reasons for spin-offs in business
The most common reason for the creation of a spin-off business is that the parent company sees new potential in it.Spin-offs tend to increase revenues because the new independent companies can better focus on their specific products or services.A company may undertake a spin-off to better allocate its resources and more efficiently manage a division that has longer-term potential, or if part of the business is going in a different direction and has different strategic priorities than the parent company.However, the spin-off will have a separate management structure and a new name, while retaining the same assets, intellectual property and human resources. However, this process should result in a situation where both the parent company and the spin-off tend to perform better separately than together.
The main reasons to consider spin-off businesses arise, for example, if:
- There are segments of your portfolio that no longer match the company's core competencies, even though they continue to perform well.
- There are businesses that could perform better under separate management or in other markets.
- The spin-off of a particular division would allow the parent company to gain a stronger focus.
What is the significance of the spin-off business?
The creation of a spin-off business creates new value for the company and can accelerate the growth not only of the spun-off "entity" but also of the parent company. This creates a whole new potential for both parties. The importance of the spin-off business also lies, of course, in the economic factors. The spin-off can free the parent company and the spin-off from capital and bureaucratic constraints, so that they can pursue strategies that they otherwise could not.But their fates often remain linked. This is how the Aspecta spin-off came into being - Solvedio digitisation platform, which we will introduce in the next article.