What does unbundling have to do with lemonade?

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Lemonade.jpg

When I was a lighty my best friend and I were budding entrepreneurs. Every Saturday morning we’d set up shop at the bottom of one of our parents’ driveways to ply our wares – mine being homemade lemonade and his, cricket player fan cards. For real – like a scene out of a movie. And believe it or not, we actually made some lekker pocket money! (I was saving up to buy Ultra Hair Barbie and he had major expansion plans for his Lego collection). But soon enough we realised that our mutual venture required a different focus from each of us. My friend had far better luck selling his cards to mates at the Tuck Shop during second break, while I had cracked the Mommy market and saw my profits soar at monthly book clubs and at the spectator bench during afterschool sports. Before we knew it our Saturday morning stand just didn’t make sense anymore and we decided it was best to each do our own thing. No hard feelings, just business smarts.

I didn’t know it back then but essentially what we had done was undergone a process of unbundling – a separating of our business offerings to give each a better focus with a new strategy in mind (Ehem, child genius. #JustSaying). For us, dividing our business gave us new opportunities and benefits – and it made more sense for our customers as well.  Companies unbundle for different reasons, but the decision comes down to its owners. They look at the context of the current economy and decide if certain aspects of the business might benefit from having a more concentrated focus.  If it makes sense, they’ll split the business into separate entities.

This also affects shareholders. In its simplest example (if and when the split happens) the investor will keep their shares in the original parent company and will also receive shares in in the new company. This could either be divided one for one, meaning the investor would get an equal amount of shares in the new company, or it could be based on a different ratio depending on how each segment of the business is valued, or possibly even a cash settlement to compensate shareholders. Likewise, the public perception of each (newly independent) part of the business could affect the share prices of either to change independently.

My lemonade/ cricket player fan card unbundling didn’t quite make the headlines, but lately you may have noticed a lot of buzz around the topic - particularly surrounding Bidvest, which is going to be unbundling into Bid Corporation Limited (BID) (its food services business) and Bidvest Group Limited (BVT) on 30 May 2016. This is a one for one split and so people who have shares in Bidvest will receive one Bid Corporation Limited share for every one Bidvest Group Limited share held at close of business on the Last Day to Trade.

If you think about it – unbundling is just a way of adapting to a number of changes and varying factors. What’s that saying? When life gives you lemons, make lemonade!