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May 8, 2017

Why Spinning Out Could Help Your Business Grow

As a business grows the natural thought would be, how can it expand and enhance it's offering?

When this time comes, the idea of a spin out company may be a common consideration.

A spin out would allow a business to separate certain divisions of itself to form a new corporation which the original company still has a stake in.

This development can offer significant advantages – from aiding the progression of the core company to pinpointing an exciting potential side enterprize.

Whilst the idea of splitting the business into fragments could be initially daunting, a spin-out approach can often have many benefits for both businesses.

Director of Corporate at Greenaway Scott Matthew Sutton explained the move can “create unexpected possibilities” for a transitioning business. 

“We understand that discussing the possibility of a spin out can be quite intimidating as people are unaware of what this could mean for their business.

What it could mean is something potentially beneficial for the parent company, and could bring positives you may not have foreseen.

A spin out can allow the parent company to focus on aspects which could benefit from individual attention, so in splitting one area of the company from the main business, it could allow the new corporation to flourish in its own right.

This could not only be beneficial for that individual branch of the company but also strengthen the core business’s offering going forwards.

A spin out could also allow the core business to detach itself from an area which is having a detrimental effect. In separating, it can ensure the parent business is protected from any harm.

Whatever the motivation, we are here to guide you through the process.”

 

Four reasons to divest your company:

Being risk adverse – Splitting the parent company from a spin off can help to minimise risks to both  businesses. A new business will have different risks associated with it. Divesting this could help to stabalize the parent company proving an opportunity to address any issues with the newer business.

Brexit – With Brexit impending and policy changes underway, the economic environment is currently going through a period of uncertainty. This state of flux could have implications for the parent company which could result significant benefits.

Decisions – A spin out means both businesses can make financial and operating decisions without fear of the implications it can have on the other. By separating them they can address these without increasing impacting the core business.

Regulated or unregulated – The core business may choose to separate from the spin out to detach itself from an unregulated company. This may allow the unregulated company to grow without being restricted by certain regulations.

If you're looking for legal advice on a start up business or a spin out business, get in touch with our commerical law team today. 

This article was first published on the 8th May 2017 on Business Wales

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