1. Wordcount: at least 2,000 words – references are excluded from the wordcount;
2. Please submit ONLY word documents. PDFs or any kind of photo documents will not be marked;
3. Please do not plagiarise: any similarity index above 20% will be referred to the Ethics Committee;
4. Prose is highly recommended as opposed to any metrical structure of text;
5. Please title your answers, for example: Answer to Question 1 or Answer to Question 2;
6. If you need extra time, please apply for Extenuating Circumstances;
7. Deadline: saturday 2th of April by 23:59 GMT/UTC
Based on the case study: ‘Fiat: The Value of a Spinoff’
Answer all three questions.
Q1. (Weight 40%)
Investigate Fiat Group’s different options for splitting up its constituent companies in order to enable the market to assess the performance of its two main businesses (Capital Goods and Automobiles) on an individual basis.
Q2. (Weight 30%)
Critically reflect on the pros and cons of the diversification strategies.
Q3. (Weight 30%)
Comment on all possible reasons explaining the diversification discount.
Copyright © 2011 SDA Bocconi, Milan, Italy
Fiat / Fiat Industrial
The Value of a Spinoff
Stefano Gatti
Stefano Lenzotti
112-009-1
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SDA Bocconi School of Management Fiat / Fiat Industrial
2011_002
Copyright © 2011 SDA Bocconi, Milan, Italy
Stefano Gatti, Stefano Lenzotti
Fiat / Fiat Industrial – The Value of a Spinoff1
“There is no longer any reason to keep together sectors that
operate with such diverse financial and industrial logic. The
concept is not only outdated, it no longer serves any useful
purpose.”
Sergio Marchionne, 16 September 2010
1. Background of the Deal
“Fiat Investor Day”, held in Torino, Italy on 21 April 2010, set the stage for CEO Sergio Marchionne and
members of the Group Executive Council to present the first quarter 2010 results to the financial
community, along with projections for the future of the Fiat Group and its constituent companies.
This much anticipated event coincided with the official resignation of President Luca Cordero di
Montezemolo, and the subsequent appointment by the Board of Directors of John Elkann, grandson of
Giovanni Agnelli and President of EXOR, parent company of the Fiat Group
During the presentation of the 2010-2014 Business Plan, a partial and proportional demerger was
announced, slated to take place in the months to come. This move would lead to the listing of a new
holding, completely independent of the Fiat parent company: Fiat Industrial.
All companies operating in the “Capital Goods” business would be transferred to the new group. Pertinent
activities would encompass production of industrial vehicles, agricultural machinery and relative
mechanical parts. Only companies with “Automobile” as their core business were to remain under Fiat.
The need for a spinoff in the Fiat Group had been apparent for some time, and for two main reasons. First,
the market found it difficult to appreciate the full value of each individual company within the framework
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