Corporate spinoffs grow in size and complexity
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The average size of corporate spinoffs is growing, as CEOs look beyond hiving off unloved divisions and toward more complex, transformative deals.
Why it matters: Boards and C-suites at major companies are opting to tackle giant separations before an activist investor does it for them.
Zoom out: For years, spinoffs were mostly known for a parent company separating a division that just did not fit with the core business. These were often seen as low-hanging fruit-type deals to prune a smaller or underperforming unit to boost value within the main company.
Zoom in: Before 2008, the average market value of a spinoff was around $1 billion. Today, that has grown to $2.5 billion, according to Trivariate Research, based on data compiled between 1999 and 2024.
- Spinoff deals are also getting more creative, including European companies cleaving off a division and listing it on a U.S. stock exchange.
- Comcast is pursuing a bold move to spin off its cable networks in a strategic shift that will impact the entire industry.
FedEx said last month it was spinning off its freight division, in a deal expected to unlock $20 billion of market value.
- "In the U.S., the trend is companies doing larger separations that are more impactful rather than portfolio pruning," says Michael Kagan, a managing director at Morgan Stanley. Part of what's driving the trend is CEOs having more confidence in business and macroeconomic soundness following a few years of COVID-era volatility, he says.
- "CEOs are asking, 'Where does the company want to go for the next 10-plus years? What is the right strategy now that we are more stable?'" notes Kagan, who is the bank's global head of separations and structured solutions.
By the numbers: The U.S. last year saw 20 spinoff IPO announcements raise $12.8 billion, double the number and value from 2023, according to LSEG.
- Globally, 237 spinoff IPOs raised $53.9 billion in 2024, a 21.3% increase in size and a 17.4% drop in number, LSEG data show.
Between the lines: CEOs aren't the only ones eyeing separations. Over the last decade, activist investors have routinely arrived at the doorstep of companies saying the sum of the parts is more valuable than the combined entity.
Case in point: Elliott Management launched a campaign at Honeywell in November, demanding the $140 billion conglomerate consider breaking up.
- A month later, CEO Vimal Kapur said Honeywell was eyeing the spinoff of its aerospace division, a unit analysts say could be valued at $90 billion to $120 billion on its own, including debt.
- "Simplification is a huge theme, and boards are generally out ahead of it now in terms of knowing that activists are going to come in and say, 'You should break up," said Stephan Feldgoise, Goldman Sachs' global co-head of M&A.
