Three industry giants, GE, Johnson & Johnson, and Toshiba, announced this week their split into several companies, a fundamental move, demanded by the financial markets, intended to provide consistency and readability, while favoring the sectors of growth. “This illustrates a trend which has been at work for more than twenty years and which pushes companies to focus on a single market”, analyzes Michael Useem, professor at Wharton University and specialist in industrial restructuring. For him, this series of announcements “will underline the fact that the diversified conglomerate, even if it occupied a huge place in American economic history, is on the verge of extinction.”
But not all self-carving conglomerates are suffering. “J&J is a great company,” recalls Jim Osman, director of The Edge and specialist in “spin-offs” (part of a whole is separate from the rest). “There is no good and bad activity” within the group, he insists. “There are two beautiful branches that they think can shine on their own.” For him, the sequence is linked to the evolution of Wall Street, which has been flying from record to record since the beginning of the year. “Companies try to create value with spin-offs when you are near highs on the stock market,” he says. “This is normal. You can no longer derive growth” from the share price without upsetting the very structure of the company.
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