Illustration: Rebecca Zisser/Axios

United Technologies, which announced last week it will split into three separate public companies, is joining the ranks of industrial giants that have decided bigger is not always better.

Between the lines: Industrial conglomerates were formed in the post-WWII era after an antitrust crackdown made it challenging for companies to buy rivals or acquire businesses within their own supply chains. But by the 1990s most began slimming down, and the best-known remaining industrial conglomerates are now determined to shrink (General Electric) or shake off the conglomerate label (3M).

"Conglomerates are together but too often there are no synergies in them," says activist investor Carl Icahn, who's pushed for changes at industrial conglomerate Newell Brands. "You have a lot of different brands they put together and they don't necessarily fit. They are not able to get the returns you'd like to see. They overpaid for a lot of the assets they bought. And the management was really never that good to begin with."

3M CEO Michael Roman wants shareholders to think of the company as anything but a conglomerate, even though it operates in a dozen industries and manufacturers everything from Post-it notes to oil and gas pipeline coatings.

  • "[What] makes us not a conglomerate [is that 3M is] a clearly focused enterprise [that owns] a unique value differentiator that is really leveraged broadly in the company, " Roman said at 3M's investor event in November.
  • Back in 2016, when Danaher was still an industrial conglomerate, company CEO Thomas Joyce told analysts: "We're not huge fans of the term conglomerate for a lot of reasons in terms of what is implied." Danaher later spun off its industrial tools and dental businesses.

"It's a stigma to be called a conglomerate. It makes you sound confused," explains Jerry Davis, professor of management at the University of Michigan Ross School of Business, who wrote a research paper in 1994 about the decline of conglomerates. "It's the ADHD of the corporate world."

We're witnessing a decades-in-the-making end for industrial giants, but the conglomerate concept is not entirely dead.

"A lot of Silicon Valley firms — Amazon, Google, Facebook — they really are conglomerates," Jerry Davis says. "And yet at some level you can see what the coherence is. Industrial conglomerates don't have any advantage in applying its technology to a bunch of different industries. What's different is the information technology gives you an advantage."

Go deeper

Updated 10 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 1:30 a.m. ET: 19,861,683 — Total deaths: 731,326 — Total recoveries — 12,115,825Map.
  2. U.S.: Total confirmed cases as of 1:30 a.m. ET: 5,044,864 — Total deaths: 162,938 — Total recoveries: 1,656,864 — Total tests: 61,792,571Map.
  3. Politics: Pelosi says states don't have the funds to comply with Trump's executive order on unemployment — Mnuchin says Trump executive orders were cleared by Justice Department.
  4. States: New York reports lowest rate of positive coronavirus test results since pandemic began
  5. Public health: Ex-FDA head: U.S. will "definitely" see 200,000 to 300,000 virus deaths by end of 2020. 
  6. Schools: 97,000 children test positive for coronavirus in two weeks — Nine test positive at Georgia school where photo showing packed hallway went viral .

97,000 children test positive for coronavirus in two weeks

A boy has his temperature checked as he receives a free COVID-19 test in South Los Angeles in July. Photo: Mario Tama/Getty Images

At least 97,000 children tested positive for COVID-19 in the final two weeks of July and there's been an estimated 338,000 cases involving kids in the U.S. since the pandemic began, a new report finds.

Why it matters: The findings in the report by the American Academy of Pediatrics and the Children’s Hospital Association comes as schools and day cares look to reopen in the U.S., with New York Gov. Andrew Cuomo (D) announcing Friday that school districts in the state can reopen in the fall amid lower coronavirus transmission rates.

Updated 1 min ago - World

Hong Kong media tycoon Jimmy Lai arrested under national security law

Media tycoon Jimmy Lai at the Next Digital offices in Hong Kong in June. Photo: Anthony Wallace/AFP via Getty Images

Hong Kong pro-democracy activist Jimmy Lai has been arrested for "collusion with foreign powers" and the offices of his newspaper raided, said Mark Simon, an executive at the tycoon's media firm Next Digital on Monday.

Why it matters: He was arrested under the new national security law that gives Beijing more powers over the former British colony. Lai is the most prominent person arrested under the law — which prompted the U.S. to sanction Chinese officials, including Hong Kong leader Carrie Lam, over Beijing's efforts to strip the territory of its autonomy.