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The corporate venture dilemma: business unit vs spin-off.

Bundl
Bundl

DOWNLOAD DECK —> https://bundl.buzz/bu-spinoff What’s the ideal entity set-up for a corporate venture: business unit or spin-off? We've examined the benefits of each to help your choice, in our latest report. Together with Yannick Verryke and Timmy Baert, we defined and compared each entity format to provide you deeper insight and help you make the right decision for your corporate venture. Download your copy using the following link: https://bundl.buzz/bu-spinoff

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The corporate
venture
dilemma:
business unit
vs spin-off.
In collaboration with
Introduction.
P a r t 0 1 .
What are your
motivations to choose
the entity format for
your corporate
venture?
Run through the main
criteria with us to get
a deeper insight.
As a corporate venture development firm, we have come
across the same crucial crossroad with our clients time
after time: what’s the ideal entity set-up for a corporate
venture?
Spin-off, spin-in, carve-out, spin-along, business unit, new
product offering under an existing brand, a new brand
under an existing corporate structure… there are so many
ways to structure your corporate venture, and there is no
black or white answer. One thing is for sure; this decision
has a crucial impact on the speed and success of your
corporate venture.
In this deck, we focus on the decision between a business
unit and spin-off, since this the most common dilemma we
come across in ventures that tend to go further away from
the core activities of the company.
We will guide you through the definitions of both entities,
compare them with the benefits, and provide vital
additional perspectives to keep in mind when making your
choice.
Special thanks:
Yannick Verryke from Cresco Law and
Timmy Baert, who co-authored this report.
Thomas Van Halewyck
Co-founder and managing
partner at Bundl
LINKEDINEMAIL
Definition.
P a r t 0 2 .
D E F I N I T I O N
Business Unit
vs Spin-off
A business unit is a fully-functional
unit with its own vision and direction.
Typically, a strategic business unit
operates as a separate unit, but it is
also an essential part of the existing
legal structure of the
parent company.
A spin-off refers to a process of
creating a new company
that operates separately from an
existing one (e.g. through the
incorporation of a subsidiary or
joint-venture).

The spin-off, the newly created
company, has its own assets and
distinct business operations that are
no longer under the control of the
parent company.
Business Unit Spin-off
Before we make a trade-
off between the two
different types of entities,
let’s first help you by
defining them.
Comparison.
P a r t 0 3 .

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The corporate venture dilemma: business unit vs spin-off.

  • 1. The corporate venture dilemma: business unit vs spin-off. In collaboration with
  • 3. What are your motivations to choose the entity format for your corporate venture? Run through the main criteria with us to get a deeper insight. As a corporate venture development firm, we have come across the same crucial crossroad with our clients time after time: what’s the ideal entity set-up for a corporate venture? Spin-off, spin-in, carve-out, spin-along, business unit, new product offering under an existing brand, a new brand under an existing corporate structure… there are so many ways to structure your corporate venture, and there is no black or white answer. One thing is for sure; this decision has a crucial impact on the speed and success of your corporate venture. In this deck, we focus on the decision between a business unit and spin-off, since this the most common dilemma we come across in ventures that tend to go further away from the core activities of the company. We will guide you through the definitions of both entities, compare them with the benefits, and provide vital additional perspectives to keep in mind when making your choice. Special thanks: Yannick Verryke from Cresco Law and Timmy Baert, who co-authored this report. Thomas Van Halewyck Co-founder and managing partner at Bundl LINKEDINEMAIL
  • 5. D E F I N I T I O N Business Unit vs Spin-off A business unit is a fully-functional unit with its own vision and direction. Typically, a strategic business unit operates as a separate unit, but it is also an essential part of the existing legal structure of the parent company. A spin-off refers to a process of creating a new company that operates separately from an existing one (e.g. through the incorporation of a subsidiary or joint-venture).
 The spin-off, the newly created company, has its own assets and distinct business operations that are no longer under the control of the parent company. Business Unit Spin-off Before we make a trade- off between the two different types of entities, let’s first help you by defining them.
  • 7. Easier to maintain strategic synergies from a consolidated group perspective. (other BU product roadmaps, …) Easier to maintain strategic focus in both the parent company and spin-off, and to diverge. Strategy Stakeholders Easier to involve third-party investors or management with a minority or majority stake. Single-source decision making, with more autonomy and a clear and more concise board structure. Reporting structure aligned with corporation. Independent reporting rhythm and structure, with tailored KPI strategy. Reporting Easier to maintain strategic synergies and aligned reporting structure. Easier to maintain focus and a faster decision-making structure. Business Unit Strategy & Governance Spin-off Governance Structure Aligned with internal policy and corporate interest. Board of directors structure, with minority/majority control.
  • 8. Easier to perform “corporate power” in legal conflicts. Easier to insulate your business’ assets from liability.Liability Politics Legal & procurement department, docs & policies at hand. Not restricted by ‘heavy’ corporate procedures. Easier to leverage existing supplier network & deals, but restricted by corporate group interests (minimum order quantity, credit lines, …) More autonomy. No restrictions to suppliers, and corporate competitor collaboration possible. Freedom to Operate Easier to leverage corporate power, procedures, and supplier network. Easier to insulate from liability, set up faster with tailor-made procedures, and more freedom to operate. Business Unit Spin-off Legal & Procurement
  • 9. Business Unit Spin-off Leverage of internal HR department. (contracting, HR admin, …) No restrictions to corporate procedures.Recruitment Attracting talent Easier access to internal resources (also temporary). Easier to attract external entrepreneurial talent. Ownership Risk of resources reprioritising or part-time mindset. Full-time focused team. Incentives Ability to plug in existing compensation strategy & packages. No limitations on compensation packages and equity incentives possible. People & Operations Easier access and leverage of internal resources and corporate HR department. Easier to have a dedicated leadership team, faster hiring procedures, and equity incentives possible.
  • 10. OPEX investments when needed and easier to shift internal budgets. Access to own funds and easier to open capital structure to future investors. Budgeting Reporting More flexibility around revenue/ cost and profit allocation through internal transfers. Ability to operate without corporate cost structure, creating objective and transparent view. Consolidated revenues & value with corporation. Ability to execute an exit strategy to reach higher/faster/optimized ROI.Market Value Ability to tailor to the needs of the corporation. Business Unit Spin-off Finance & Tax Tax Fewer tax benefits from keeping subsidiaries as a consolidated organisation. Allows the divestment of a non- core business in a tax-efficient manner. Ability to tailor to the needs of the spin-off, and unlock shareholder value.
  • 11. Easier to leverage the corporate brand portfolio to gain customer trust. More freedom to experiment, with less brand impact on corporation.Branding Channels Ability to leverage existing owned- and-operated channels. Less obligations to align with internal stakeholders and more freedom to operate in new channels. Ability to leverage existing partnerships with internal stakeholders and agencies to execute campaigns at scale. Ability to experiment quickly and adapt growth-marketing tactics on the go. Marketing Business Unit Spin off Branding & Marketing More opportunity to leverage existing brand portfolio, channels and marketing department. More flexibility to experiment with new brands, channels & marketing tools.
  • 12. Leverage of existing corporate IT infrastructure & development partnerships. Ability to have tailor-made IT infrastructure.IT Support Sales teams Leverage of existing sales teams and network. Ability to have a fully dedicated sales team in place with clear tailored objectives. Ability to leverage existing assets of the corporation as an unfair advantage. Ability to build a tailor-made environment and team. Business Unit Spin-off Other Production Leverage of existing production facilities, departments, and partnerships. Ability to have a tailor-made production team and facility or partnership.
  • 13. Overview. P a r t 0 4 .
  • 14. Easier to maintain strategic synergies and aligned reporting structure. Easier to maintain focus, more autonomy, and a faster decision- making structure. Strategy & Governance Legal & Procurement Easier to leverage corporate power, procedures, and supplier network. Easier to insulate from liability, set up faster with tailor-made procedures, and more freedom to operate. Easier access and leverage of internal resources and HR department. Easier to have a dedicated leadership team, faster hiring procedures, and equity incentives possible. People & Operations Business Unit Spin-off Finance & Tax Branding & Marketing Other Ability to tailor to the needs of the corporation. Easier to leverage existing brand portfolio, channels and departments. Ability to leverage the existing assets of the corporation as an unfair advantage. Ability to tailor to the needs of the spin-off, and unlock shareholder value. More flexibility to experiment with new brands, channels & marketing tools. Ability to build a tailor-made environment and team. Comparison Overview. O v e r v i e w . This overview highlights the main conclusions of each of the different main criteria.
  • 16. Existing Existing New offerings Newmarkets Developing breakthroughs and inventing things for markets that don't exist yet. Radical Innovation Expanding from existing business to ‘new to the company’ business Adjacent Innovation Optimising existing products for existing customers Core Innovation Business unit structure Spin-off structure Recommendation On the innovation Matrix. I n n o v a t i o n M a t r i x . The further away from the core business the new corporate venture operates, the less it will presumably leverage core corporate assets, thus benefiting more from a spin-off set-up.
  • 17. Key success factors of corporate ventures to keep in mind. S u c c e s s f a c t o r s . The prime goal is to create value and the following factors will aid in getting there faster. Keep each of these in mind when choosing the best venture structure. Agility. Unfair advantage. Team. Focus. Agility is one of the key success drivers for any startup out there. Make sure you choose the structure that provides the right agility for your venture to pivot and adapt quickly. Leveraging your corporate assets is your unfair advantage in the market. The key is structuring your corporate venture to leverage these assets without losing speed or building restrictions. Having the right team in place is ranked in the top 3 of most startup success factors. Think twice about which structure allows you to attract and incentivise the right internal or external talent. A new venture needs a clear strategy, dedication, and focus. And choosing the right structure can affect the focus of your venture, so beware.
  • 18. Want to discuss how best your venture can be structured? Reach out to me. Thomas Van Halewyck Co-founder and managing partner at Bundl LIN KEDINE MAIL