“The essence of strategy is choosing what not to do.”
Michael Porter, professor at Harvard Business School and architect of modern thinking about competition, repeated this sentence throughout his career. Most companies fail not because they do too little—but because they do too much. They disperse, overextend, lose focus. They try to be everything to everyone and end up as nothing to anyone.
A company division is the operational realization of this principle: a conscious decision to cut away what does not serve the core purpose.
Jack Welch and the Logic of Separation
When Jack Welch took the helm at General Electric in 1981, he inherited a conglomerate manufacturing everything from light bulbs to jet engines. His first decision? Sell or close every business that was not first or second in its market.
Wall Street called him “Neutron Jack”—after the bomb that destroys people but leaves buildings standing. Welch preferred a different term: focus.
Over two decades, GE’s value increased fortyfold. Not through addition, but through subtraction.
For the Polish entrepreneur, Welch’s lesson has direct application. A company that has grown organically over the years often contains businesses with different dynamics, different risks, different capital requirements. Keeping them together—under one roof, in one legal structure—may make sentimental sense, but rarely makes strategic sense.
A company division allows you to separate what should be separated.
Gary Hamel and Core Competencies
“The future belongs to companies that can forget faster than they learn.”
Gary Hamel, one of the most influential thinkers on strategy, co-developed with C.K. Prahalad the concept of “core competencies”—what a company does better than anyone else and what constitutes the foundation of its competitive advantage.
Everything else is unnecessary ballast.
A manufacturing company that over time developed its own logistics, its own IT department, its own distribution network—may discover that these “supporting” divisions consume more managerial resources than the core business. That warehouse problems obscure product problems. That accounting cannot separate what earns from what loses.
A division by spin-off allows you to sever the periphery from the centre. The separated business becomes a distinct entity: with its own balance sheet, its own management, its own accountability for results.
The centre can finally concentrate on what it does best.
Andrew Carnegie and the Time to Sell
“The man who dies rich dies disgraced,” Andrew Carnegie, the steel baron of the nineteenth century, used to say. But before he began giving away his fortune, he had to build it—and sell it.
In 1901, Carnegie Steel became part of U.S. Steel for four hundred and eighty million dollars—the largest transaction in history up to that time. Carnegie knew something that many entrepreneurs ignore: there is a time to build and there is a time to harvest.
A company division is often preparation for a transaction.
An industry buyer wants to acquire your production but does not want your distribution. A private-equity fund is interested in the profitable part of the business but does not want to drag along the segment generating losses. A potential acquirer sees value in the real estate you own but not necessarily in the operations you conduct.
Without a company division, the transaction is difficult or impossible. The buyer would have to acquire everything and perform the separation himself—which means risk, cost, time. Most prefer to avoid this.
A pre-sale division—a so-called carve-out—is a manoeuvre that isolates the attractive component and packages it in a structure ready for acquisition. Clean history, clean assets, clean liabilities.
The price rises when the buyer knows what he is buying.
Roger Martin and the Conflict of Strategies
“A strategy that says ‘yes’ to everything is not a strategy.”
Roger Martin, former dean of the Rotman School of Management, studied for years why corporate strategies fail. One reason: the attempt to reconcile objectives that are mutually contradictory.
A mature business generates cash and expects stability. A growing business consumes cash and requires risk. A business in crisis requires restructuring and hard decisions. Keeping them in one structure forces management into constant compromise—and compromise in strategy is a recipe for mediocrity.
Division allows each business to pursue its own strategy.
The mature segment goes into a structure optimized for dividends. The growth segment goes into a structure that can raise external financing without burdening the rest. The troubled segment goes into a separate entity that can be restructured, sold, or liquidated without infecting the healthy parts.
This is not dismemberment of the company. This is surgical removal of a conflict of interest.
The Mechanics of Division
Polish commercial law provides several paths for division—but only for capital companies (limited liability company, simple joint-stock company, joint-stock company).
Division by spin-off—when the company is to continue existing and part of its assets pass to a new or already existing entity. The classic spin-off: the parent company remains, a subsidiary is born.
Division by split-up—when the divided company ceases to exist and its assets pass to at least two entities (existing or newly formed). The company separates into parts; itself disappears from the register.
Division by acquisition—when the assets of the divided company pass to already existing companies, without creating new ones.
Each path requires:
- a division plan approved by the management boards
- financial statements
- an auditor’s opinion (in most cases)
- shareholder resolutions
- applications to the court registry
And before all of this—tax analysis, because a division that is neutral under civil law may be highly non-neutral fiscally.
Continuity and Its Limits
The law provides that the rights and obligations of the divided company pass to the acquiring or newly formed companies. But “pass” does not mean “pass automatically and unconditionally.”
Licences, permits, concessions—some require notification to authorities, some require new proceedings. Contracts with change-of-control clauses—the counterparty may have the right to terminate. External financing—the bank will almost certainly want to renegotiate terms.
A division is open-heart surgery on the company. It cannot be performed while pretending that nothing is happening.
Our Approach
We conduct company divisions like strategic operations—from diagnosis to rehabilitation.
Purpose analysis—Why the division? What do you want to achieve? What are the alternatives?
Structure design—Which part goes where? How do we divide assets, liabilities, employees? What are the tax consequences?
Preparation of the environment—Banks, counterparties, licensing authorities. Everyone must know in advance.
Execution of the procedure—Documentation, resolutions, applications, deadlines. Coördination of accountants, auditors, notaries.
Stabilization—Is the new structure working? Does anything require adjustment?
Porter was right: strategy is choosing what not to do. A company division is the moment when that choice becomes reality.
It is not failure or retreat. It is an act of strategic hygiene—cutting away what does not serve the purpose so that what does can grow.
Skarbiec Law Firm—company divisions, spin-offs, carve-outs, and restructurings.
