Corporate Deal Making Still High as Major Conglomerates Announce Breakups & Realignments: Toshiba, Johnson & Johnson, General Electric, DuPont… & More

The business world experienced a wave of change this past few weeks as four conglomerates announced plan to break up into a number of smaller firms:

• Toshiba released plans stating that it would divide into three firms: one focused on infrastructure and construction operations, a second concentrating on electronics, and a third devoted to memory storage solutions.
• Johnson & Johnson announced that it would separate its consumer products division (maker of Band-Aid bandages and Tylenol pain reliever) from its medical device and prescription drug operations.
• General Electric – perhaps one of the most famous of these conglomerates – stated it would complete a long chain of divestitures and separate its healthcare, aviation products, and power systems businesses.
• DuPont, which has been reorganizing over the past two years since its separation from DowDuPont (other surviving units include Corteva and Dow Chemical), announced it plans to sell much of its Mobility & Materials segment, including the Engineering Resins and Performance Resins lines and its stake in the DuPont Teijin Films joint venture. At the same time, it reported it would buy Rogers Corporation, a key suppliers of high performance materials in the electronics market.

The reasons for these breakups vary. For Johnson & Johnson, the decision was based on the fact that the divisions had evolved into different focuses and customer bases (consumers in the one, healthcare professionals in the other) and a separation was a logical choice. DuPont is also reorganizing toward a high growth portfolio. In DuPont’s case, it’s leaning into next generation solutions in electronics, water, protection, industrial technologies, and automotive. For GE and Toshiba, the moves were done after years of concern that by keeping their varied units together, shareholders were not receiving as much of a return on their investments as they should have been; thus, these moves were welcomed by the investor community (if not by the more tradition-minded).

Will the market see more of these moves? It is a distinct possibility; companies tend to cycle between eras of building up portfolios and eras of contracting to a reshaped view of core competencies. Additionally, as some investors are looking for more exotic opportunities – Bitcoin, crypto, SPACs, shorting – some companies will decide that it might be worthwhile to create their own buzz and separate into two or more firms, thus unlocking shareholder value.

Others, though, may continue to see value in diversification – especially as the US and global economy tries to navigate a challenging world of COVID, inflation, and supply chain difficulties.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research. Freedonia Custom Research is also available for questions requiring tailored market intelligence.