Research On The Equity Carve-out Motivation And Economic Consequences Of Powerlong Real Estate From The Perspective Of Diversification Strategy

In recent years,with the gradual tightening of relevant policies in my country’s real estate industry and the deepening of the aging population and low birthrate,the macro environment of my country’s real estate industry has undergone drastic changes,and major real estate companies are actively seeking changes to keep up with the The pace of the times,to deal with the current changes.In this context,Powerlong Real Estate,the case company in this article,split off its subsidiary Powerlong Commercial,whose main business is commercial operation services,and listed separately,in order to focus on the development of commercial operation service business,and try to cope with the current changes with a diversified strategy.However,the existing literature research on spin-off and listing mostly focuses on the general research on its motivation,economic consequences or value creation effect,and lacks research from the perspective of diversification strategy.Therefore,this paper will start from the perspective of diversification strategy.Case studies are conducted in depth and try to answer the following two questions:What is the motivation for implementing the diversification strategy by way of spin-off?Will the diversification strategy be achieved by way of a spin-off to achieve the expected economic consequences?In this case,Powerlong Real Estate’s main business is property development and property investment(property investment refers to renting out self-built shopping malls and shops,and the main source of income is property development),which belongs to the traditional heavyasset operation mode business.The main business of Powerlong Commercial,a separately listed subsidiary,is commercial operation service business,which is an asset-light operation model business and an emerging business that is still in the growth stage.The final product line and service market are different.Therefore,Powerlong Real Estate’s focus on the development of commercial operation service business through the spin-off of Powerlong Commercial and listing is in line with the definition of diversification strategy,can help Powerlong Real Estate achieve diversification from the group level,and achieve a diversified strategic layout.After the spin-off and listing,Powerlong Commercial can make use of the large amount of funds and publicly traded shares brought by the spin-off and listing,through mergers and acquisitions,research and development and share award plans,to achieve the level of revenue generation for the business operation service business and the level of incentives for executives.The substantial improvement of the Group has effectively promoted the implementation and longterm development of the diversification strategy at the group level.After an in-depth study of the case,this paper draws the following conclusions:1.Spinoff of a subsidiary whose main business is an emerging business with good development prospects is listed separately,which can focus on the development of this business at the group level,thereby realizing a diversification strategy 2.After the subsidiary is listed separately,it can effectively promote the rapid development of emerging businesses by actively acquiring suitable companies and appropriately increasing R&D investment to accumulate heterogeneous resources.Improve its income-generating ability,thereby optimizing the implementation of the diversification strategy at the group level;3.The separate listing of subsidiaries can make the subsidiary companies have the conditions to provide stock incentives to the management,avoid the problem of short-sighted management by the management,and ensure diversification at the group level.long-term implementation of the strategy.The theoretical significance of this paper is that it can supplement the research literature from the perspective of diversification strategy in the research field of spin-off and listing,so as to enrich the research angle of related fields;the relevance is to help real estate companies develop sustainably and healthily.