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Find your best fit: A leader’s guide to separating businesses

Leading Off

Cut it loose ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌   ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ 
Leading Off

Brought to you by Alex Panas, global leader of industries, & Axel Karlsson, global leader of functional practices and growth platforms

Welcome to the latest edition of Leading Off. We hope you find our insights useful. Let us know what you think at Alex_Panas@McKinsey.com and Axel_Karlsson@McKinsey.com.

—Alex and Axel
An image linking to the web page “What it takes to make separations a competitive difference-maker” on McKinsey.com.

Leaders often find that separations are more difficult than they may appear. That’s why experience is key, according to a survey of business leaders involved in separations. In their research, McKinsey’s Andy West, Anna Mattsson, and Jamie Koenig found that organizations that routinely refresh their business portfolios report better outcomes from separations than companies that pursue only a single separation. Speed is also essential: The companies that complete separations quickly tend to deliver better shareholder returns. Even when they’re working quickly to close a deal, leaders should be prepared to manage thorny issues that commonly arise between the existing company and the separated entity, such as transitional service agreements, talent allocation, and technology architecture. “Navigating the often-opposing interests of both sides is crucial for a smooth transition,” the authors say. “It may even be said that separations are like amicable divorces—at least until sticking points materialize.”

77%
An image linking to the web page “HR leaders’ role in M&A: An interview with Lisa Blair Davis” on McKinsey.com.

In M&A deals, it’s vital for the acquiring company to prioritize people issues when it brings a new business into the fold. Lisa Blair Davis, the global head of HR for Johnson & Johnson (J&J) MedTech, stresses that HR leadership needs to be involved in the entire M&A process instead of just stepping in after a deal is done. “At the 11th hour—when it comes down to closing and signing the deal—it’s always about people,” she says in an interview with McKinsey’s Andy West. During an acquisition process, Davis and her colleagues meet with the target company’s CEO to identify key talent and learn what motivates them. “We’re paying premiums because they have built things that we want to take to an even bigger scale. We need to identify those individuals who can help lead that because we don’t believe we have all the answers,” Davis says.
An image linking to the web page “When bigger isn’t always better” on McKinsey.com.

Let’s face it, most breakups are challenging. That can mean good business for heartbreak healers: the breakup coaches, organizers of well-being workshops, and developers of apps designed to soothe the pain of lost love. In the corporate world, breakups are a common consequence of companies’ long-running efforts to diversify in search of growth. Leaders often look to acquire or start businesses outside their core operations to create value, only to learn that bigger isn’t always better. McKinsey’s Tim Koller and coauthors say that this has fueled an increase in corporate spin-offs in recent years. “Some operational and other synergies may materialize—but eventually executives and boards realize how difficult it is to add value to businesses that have little or no direct connection to the company’s core business,” they observe.

Lead by separating strategically.

— Edited by Eric Quiñones, senior editor, New York

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 04:19 - 27 Jan 2025