Collectively, spun-out companies and their parents have demonstrated the benefits of ownership restructuring by outperforming the market indexes. Yet individually, the picture is different: the ranks of spin-outs include as many laggards as sprinters (Exhibit 1). A previous article¹ examined the advantages of restructuring, the methods available, and which to choose to the best advantage of parents, shareholders, and spin-outs. Here we consider how to unleash the greatest possible shareholder value by addressing the organizational challenges that these types of restructurings involve.

Any big corporation that wishes to grant a subsidiary some freedom to tap the power of financial markets has three choices (see sidebar, "Restructuring before the market speaks"). It can spin off the subsidiary by selling its entire stake to the public—usually, as a special stock dividend—and creating a new company with a separate and independent board. It can undertake an equity carve-out, issuing or selling a portion of its equity in the subsidiary to the public and (usually) keeping a majority stake in the new company, which has a separate board, assets, liabilities, and officers. Or it can create a tracking stock: a separate class of the parent company’s stock that has a...