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Case study

Divestiture adds value to parent, subsidiary

An international manufacturer and distributor of medical equipment, devices and pharmaceuticals was struggling to resume profitable growth. Bain assessed a range of possible growth models and recommended spinning off the company from its large industrial parent. The spin-off increased the parent company's market capitalization by $500 million.

  • min read

At a Glance

  • $500M increased market capitalization of parent company

The Full Story

The Situation

TotalMedCo* was a $1 billion international manufacturer and distributer of medical equipment, devices and pharmaceuticals. It was a subsidiary of IndustryGiant, a large industrial company whose primary business was in other areas.

When its leading drug came off patent, TotalMedCo was forced to scale back capital investment and reduce spending on R&D and marketing just to stabilize its business.

IndustryGiant* asked Bain to advise on a strategy to generate profitable growth and maximize the value of TotalMedCo.

Our Approach

Bain embarked upon a complete evaluation of capabilities and opportunities which weighed organic growth against acquisition/partnership models.

 

Our Recommendations

The strategy with the most promise for TotalMedCo would have required massive investments from IndustryGiant. In light of this, divesting the subsidiary was the best solution.

 

The Results

IndustryGiant opted to divest TotalMedCo rather than make new investments. Bain's work helped demonstrate the full potential of each of TotalMedCo's businesses, increasing the value created from the spin-offs and divestitures.

 

* We take our clients' confidentiality seriously. While we've changed their names, the results are real. 

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