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Blog: Story of a demerger - reflections on splitting Sift into two separate companies

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At the start of 2016 Sift was split into two separate companies - Ben reflects on the challenges he faced in getting everything done by the 31st December deadline

Sift was founded back in the mists of Internet time in 1996.  From the various products and titles we’ve launched, three business units emerged: Sift Media (publishing), PracticeWEB (online marketing platform) and Sift Digital (consultancy).  Having a three cornered stool stood us in great stead over the years, as each at different times supported the others.  For anyone interested, here's a fuller Sift History.

Yes, all three divisions shared some common approaches to engaging with audiences, with some similar approaches to technology, with a common heritage, similar values and deep friendships.  However, over the last few years, as I progressively gave the 3 businesses more autonomy, it got increasingly difficult to describe Sift succinctly and articulate a joined up vision for the company.  In particular, at the board level, it was really difficult to cover our markets adequately.  At the same time, despite our many successes, growth the last few years had been stuck at 5-10% - the mini-conglomerate structure was holding us back.

The plan was therefore to split Sift into two completely separate companies; removing the corporate overhead, to give full autonomy to the teams in order (hopefully) to support faster growth.  For historic reasons, Sift also had two separate teams both targetting the accounting sector - AccountingWEB (within Sift Media) and PracticeWEB, which we planned to merge.

Hopefully it sounds obvious - it is!  It might sound easy - it wasn't!  To make it all happen, I had various challenges.

  1. From a technical legal & accounting perspective, it took quite a while before the professionals would confirm exactly how it could be done (and how much it would cost).
  2. Gaining shareholder support was much harder.  First of all, I had to persuade Sift's other major shareholder (Kings Arms Yard VCT, managed by Albion Ventures) that it was worth even exploring.  Having had some initial discussions in late 2014, we ended up spending most of 2015 building the case for a demerger and constructing two new independent business plans, which lead to presentations to the Albion Ventures team in October.
  3. In parallel, there was the challenge of getting the two new management teams lined up for the future - and the distraction caused by this longer term planning, which could still have been derailed by events.
  4. In terms of telling the wider Sift team, we informed people progressively during 2015.  Tricky, as I couldn’t guarantee we’d get formal approval from Albion, so we couldn’t make the final announcements until November.
  5. Disentangling the two businesses operationally has actually been relatively straightforward; and outsourcing has been the solution.  Sift Digital has new external suppliers for HR, finance & IT support (at a significant discount to the equivalent costs in the shared service charge from Sift); and eight months on is in its own office.

Deals always go to the wire, and in our case I was embarrassed to be sending the final circular to shareholders by email at 1pm on Christmas Eve!  Perhaps the inevitable consequence of not being able to start some of the formal procedures with HMRC until we had full shareholder sign off.  We got it done by 31st December though.

Some reflections

●       I think it was right not to make too much of any of these changes externally.  Clients are rightly focussed on their individual projects and campaigns - not the niceties of Sift’s structural tweaks!

●       Sift Digital continued to share offices with Sift for the first half of 2016, giving everyone six months to prepare for fuller separation, which seemed to work well.  So overall, the pace of change hasn't been too hasty.

●       Based on the first two board meetings of 2016, it’s already clear to me that when the CEO is also the major shareholder (as we had for many years), however hard everyone tries, board process overall is compromised. 

●       To prove the point about focus, taking Sift and Sift Digital together, we’ve gone from having one 4-hour board meeting every two months to a 5-hour board meeting every month.  Over twice as much board time!

●       One of the things I worked really hard at was to try to be as even-handed as possible with the two companies; emphasizing to both that I was going in both directions and was just not going to let either side gain advantage over the other through the various negotiations.  This was more difficult than it sounds - I’ve had to catch myself a few times saying ‘we’ when I should have said ‘they’!

Towards the end of the process, it also began to hit home that amongst other things, I was making my CEO role redundant.  The move from CEO to Chairman comes with its own challenges, which I’ll cover in a future blog!


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