MetLife, the nation’s largest life insurance company, has just received approval from the Delaware insurance regulator to spin off its core business—life insurance. The new company will be called Brighthouse Financial. The approval is the last major obstacle to what will be one of the largest-ever corporate spinoffs. The new company will immediately become a member of the Fortune 500 list and will need to be staffed with an entire new coterie of lawyers for both its in-house counsel office as well as its anticipated multiple additional legal and quasi-legal offices, e.g., tax, compliance, risk management, contracts, etc.
Typical Types of Spinoffs
Spinoffs are an interesting potential legal employer pool. Spinoffs come in four distinct varieties:
Corporate spinoffs. A company spins off a subsidiary, division, or product line. Several websites and fee-based newsletters keep track of spinoffs (see below). However, they miss the vast majority of local spinoff companies that are constantly emerging out of larger companies. For that, you need to focus on regional business journals, general circulation newspapers, chamber of commerce announcements, and business filings. Certain industries generate many more spinoffs than others due to their heightened merger and acquisitions (M&A) activity. Hi-tech and pharmaceuticals are prime examples. Any industry on the cutting edge is likely to see more such activity.
Tax inversions. A company buys a foreign company and essentially moves offshore, which causes it to spin off certain U.S. operations.
Corporate reorganizations. A company reorganizes, during which process it sheds certain business units that either don’t fit the new business model, are unprofitable or underperforming, due to a need to raise cash to grow the remaining portions of its business, to finance an acquisition, or is forced by government antitrust agencies or other regulators. Example: Several years ago the Pentagon issued a rule prohibiting companies from advising Defense agencies on weapons systems while also bidding on contracts to build them, resulting in more than 30 divestitures.
Entrepreneurial Spinoffs. This type of spinoff is surging. Here, researchers who work for a university leave their employer to launch a new company based on research and innovation the founders did while employed by the institution. The Association of University Technology Managers (AUTM) 2015 Licensing Activity Survey reported that 1,012 startups were launched that year as a result of university research and innovation. The typical entrepreneurial spinoff is a highly localized or regional event. The AUTM survey reported that 72 percent of the startups had their primary place of business in the licensing institution’s home state.
Universities that generate such spinoffs usually provide a lot of public information about their activities. Keeping up with their technology commercialization offices, sponsored research offices, grant offices, and/or legal counsel offices is a good way to get advance notice. Two caveats:
- Focus your attention on research universities. While private institutions like MIT, Harvard, Stanford, Chicago and Princeton are in the forefront of such activity, they are by no means the only academic institutions so involved. Don’t overlook large state universities like Ohio State, Michigan, Texas, Penn State, Colorado, the University of California and the California State University systems, among others, as well as a hybrid private-state institution like Cornell—all are major entrepreneurial engines.
- Office nomenclature varies. While I used the most common office names to describe university offices you should monitor, these office titles not necessarily uniform among all institutions.
Not to be overlooked are U.S. government agencies, offices, and laboratories that focus on commercializing research and innovation. There are a surprisingly large number of such entities. The major ones are as follows:
- Office of the General Counsel
- Commercial and International Law Division
- Intellectual Property Law Division
- Office of Patent Counsel, Technology Commercialization Office, Goddard Space Flight Center
- Office of the Chief Counsel, Kennedy Space Center
- Office of the Chief Counsel, Intellectual Property Law Division, NASA Glenn Research Center
- National Oceanic and Atmospheric Administration, Office of Research and Technology Applications
- National Institute of Standards and Technology, Office of Technology Partnerships
- Office of the Chief Counsel for Technology
- Army Materiel Command
- Office of Command Counsel, Business Operations Law Division
- Office of Chief Counsel, Army Research Laboratory
- Office of Chief Counsel, Aviation and Missile Command
- Office of General Counsel of the Air Force, Acquisition Law Division
- Department of the Navy
- Office of the General Counsel,
- Office of Naval Research, Office of Counsel
- Office of General Counsel, Deputy General Counsel for Technology Transfer and Procurement
- Los Alamos National Laboratory
- Office of Laboratory Counsel
- Intellectual Property Practice Group
- Conflict of Interest Program Office
- Technology Transfer Division
- Lawrence Berkeley National Laboratory
- Technology Transfer Department
- Office of Laboratory Counsel, Patent Department
- Thomas Jefferson National Accelerator Facility, Office of Legal Counsel
- Pacific Northwest National Laboratory, Office of General Counsel
- Lawrence Livermore National Laboratory
- Industrial Partnerships and Commercialization Office
- Office of Laboratory Counsel
- National Energy Technology Laboratory, Office of Chief Counsel
- Oak Ridge National Laboratory, Office of General Counsel
- Ames Laboratory, Office of Planning and Intellectual Property
- Agency for Health Care Research and Quality
- National Institutes of Health
- Office of Technology Transfer
- National Cancer Institute, Technology Transfer Branch
If you are looking for job opportunities deriving from spinoffs, you need to be quick on your feet because these transactions normally occur in a short time frame with far less notice than acquisitions. In some cases, you can actually anticipate this activity. Monitoring M&A activity is one such means because it frequently presages spinoffs. The spinoff websites listed below are another good resource.
When a spinoff occurs, it is often the case that the new company will need a new legal staff and also have to fill positions in parallel quasi-legal offices such as Compliance, Tax, Risk Management, Intellectual Property, Privacy, Ethics, and others.
For More Information