October 17, 2019
Spin-Offs: IPOs With Points for the Degree of Difficulty
American gymnast Simone Biles was busy shredding the record book last week on her way to winning her 24th world championship medal. One of the things that separates Biles from the pack is the degree of difficulty in her routines. She does things that nobody else will try. In that way, she’s just like me – after all, no other blogger would dare try to stretch Simone Biles’ athletic achievements into an analogy for a law firm memo about spin-offs, but hold my beer & just watch . . .
According to this Latham memo, spin-offs are essentially IPOs with a Biles-level degree of difficulty. Here’s an excerpt:
Spin-offs require many of the same business and legal preparations as an IPO – with the added complexity of separating a business in two. ParentCo must not only register SpinCo with the SEC and successfully market SpinCo stock to investors and analysts, it must also prepare SpinCo to operate as a stand-alone public company and address employee, cultural and business changes that go along with separating a business unit.
The memo provides a concise overview of the myriad corporate, securities, governance, tax, and business issues associated with a spin-off, and also discusses some of the practicalities associated with dealing with equity analysts and the trading markets.
Okay, so I admit that I probably didn’t stick the landing here when it comes to this analogy, but what can I say? You miss all the shots you don’t take.
– John Jenkins