If you haven’t noticed, recently some of the biggest household companies are getting smaller and some are just about to become smaller. DuPont, United Technologies, IBM, and General Electric are just a few of the multi-billion-dollar corporations that have decided that the sum of their parts is greater than the whole in recent years. Kellogg, 3M Co. and Danaher are scheduled to break up later in the year too. But why this phenomenon?
Before we head down into the rabbit hole, something should be clarified. Spinoffs are the most valuable corporate action when it comes to a break-up. They are not manufactured investments like IPO’s, which are sold to the public at the highest possible price. With a Spinoff, you gain shares of the Spinoff company whether you like it or not, which throws up a range of dynamics. In fact, Spinoffs are the most inefficient way of distributing stock to the wrong people, but that creates opportunity.
Of all sectors, big tech hasn’t succumbed to breaking itself up as it chose to get larger and larger. With size come problems like regulatory scrutiny. Ultimately, several variables, such as public sentiment, political pressure, and legal changes, will determine whether large digital businesses are broken up. It may not take much to get there in the current political and social environment and if the economy takes a downturn, these Big Tech businesses will be under more pressure to act.