The news from my old shop, Barclays Global Investors , is that part of the firm will be sold off by its parent company, United Kingdom-based Barclays PLC . While there have been conflicting reports , some sources have reported that the sale is an attempt by the parent corporation to raise cash to avoid the requirement to participate in the UK government’s insurance protection scheme.
While breaking up was tough in high school, if it happens with BGI’s iShares you can see first hand how tricky – or easy – it gets in business. For people in financial services it offers a chance to see if a new owner brings better – or worse performance. For organizational development and human resources types, it will offer a first hand peek at things that work, and things that don’t in organizational change.
In the case of the folks who form what’s knows as the exchange traded funds (ETF) unit at BGI – aka iShares – it means figuring out a few things just to begin the separation. Apart from the obvious – who are “our” employees and who are “yours” – particularly when some of “yours” have been providing things like legal, accounting, tax, human resources, and administrative services all along.
Infrastructure – particularly those computer server boxes and auxiliary equipment which provide the backbone of any trading and transaction heavy business – is something that must be tackled since the “us” and “them” starts to be tricky once you separate .
Third, by press accounts, the iShares unit will be sold either to another firm (think “bolt-on”) or to some combination of private equity and other investment firms. The iShares unit comes from a place of great success: essentially a start-up backed by the funding of a deeper pockets asset management company. By all accounts folks in the iShares unit have worked hard, and have likely received the benefits of being successful.
But they have also been a start-up with a difference – or at least not like the start-ups with whom I’ve worked. In the case of iShares the support of BGI appeared to mean that the didn’t have to worry about running out of money short-term and having the lights turned out, having health insurance benefits cut, or an eviction note on the front door to their offices for not paying their bills: all things that any number of regular start-ups face. Buzzsaw by Autodesk is the only good example from the dot com era that comes to mind.
If they are sold they will go to a new owner, an owner who is likely to want to earn back its purchase price in a reasonable time. Pay schemes may shift so that straight cash gets shifted to other forms of compensation (stock for example, or performance unit grants) so that cash from the business in part pays off the purchase for the new owner. In addition, compensation schemes in companies frequently are flavored by whoever is the legacy business, or largest business. In the case of BGI, that’s the asset management business. That may change once the new owner has a fresh chance – a clean slate so to speak – to structure compensation schemes to pay employees appropriately in the new business for to achieve the new owner’s business goals.
In short, divestitures, this breaking up or out of one business unit, is tough work (And for more from a Booz – formerly Booz Allen Hamilton – pdf on the subject is here .)