CDK Global’s CFO: We Will Be Much More Nimble

With spinoffs becoming even more popular, it’s worth remembering that these transactions affect lots of people and are actually quite complicated. We previously some highlighted cultural and morale issues that may arise during the process, but there are plenty more that we haven’t touched on. There is a reason the timeline from announcement to completion is typically 6-18 months and it’s not to give investors time to review all of the documents. Al Nietzel, CFO at Automatic Data Processing’s (ADP) recent dealer services spinoff CDK Global (CDK), recently chatted with the WSJ’s CFO Journal about some of the challenges in spinning off a company and some of the benefits of being a standalone company. He started off by talking about some of changes that take place at the spinco and about the timing issues:

The day-to-day operations of the business are the same. As a standalone company we were getting services from our parent, like global security. But now we’ve had to add treasury, tax and investor relations. It provided an opportunity for people who were high performing people to take on more senior roles in bigger organizations…

Our timeline was exceptionally aggressive compared to what you might see with other spins and separations. Our announcement date was in April and we separated some six months later.  I had more information prior to that, so planning for tooling up my finance organization probably started in earnest eight months prior to the official spin date.

That was quite an aggressive timeline, but apparently that wasn’t the biggest challenge:

Q: What was the biggest challenge during the transition period?

A: There is an unbelievable amount of work required to separate from a parent, and at the same time you have a regular day job. For me and members of my team it was keeping the trains on track while at the same time undertaking a significant separation. At the end of it you come out stronger and prepared for the challenges ahead.

Despite all of the hard work a spinoff entails, Mr. Nietzel still thinks it’s worth it:

Q: What are the advantages of being a standalone company?

A: I think being independent provides us the opportunity to focus and talk about our offerings a little differently than we did (while a part of ADP). As a result we will be much more nimble and quicker in decision making because the processes for investments and acquisitions can be accelerated in an aggressive way. And we can allocate capital the way we see fit, not necessarily the way the parent sees fit. It really provides us the opportunity to pursue the strategic objectives that are critical to our success.

The entire interview is worth a read and within Mr. Nietzel offers some insight into the CFO’s role and into the future of the dealer services business. While we approach spinoffs from an investment angle, it’s fascinating to hear real insider perspectives.

Disclosure: Author holds no position in any stock mentioned.