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Spinning a line on value

In an age of specialism corporate spin-offs have an inherent strategic logic. But they are also a potent way of unlocking equity value. Antony Currie reports on the spread of the technique from the US into increasingly equity conscious continental Europe.

In devising ways of unlocking equity value ­ as in so many other developments ­ the US leads, the UK picks up the theme almost simultaneously and continental Europe follows on more or less tardily. So it is with the equity technique presently in vogue with investment bankers and business managers in Europe ­ the spin-off.

In its most basic form, a spin-off enables a company to reorganize its corporate structure by initiating a separate stock market listing for a subsidiary or subsidiaries. The UK aside, the technique has not been widely used in Europe and there it has some rather formidable models from the US to live up to. One US firm, ThermoElectron, exists solely to seek out realtively obscure companies, suck them in, restructure them and spin them off. Typically it spins off between 15% and 49% of the value of a subsidiary, and to date has spun off six companies, which have themselves spun off a further 16.

Such an institutionalized approach to spin-offs is still a long way down the road for corporate Europe. But the technique is gaining in popularity and, says Dante Roscini, managing director, equity capital markets at Goldman Sachs, is becoming "a very important trend, and a useful tool for firms to achieve what has become a leitmotiv in the mid-nineties ­ to focus on one's core business".

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