Three industry giants, General Electric, Johnson & Johnson, and Toshiba, announced this week that they will split into multiple companies, a substantive move demanded by markets, aimed at offering consistency while privileging growth sectors.
Specifically, GE will give rise to 3 groups that will be listed separately, dedicated respectively to aviation, health and energy, as well as Toshiba that will create two new companies in addition to its existing structure.
Meanwhile, J&J will separate its consumer products from the rest of the company, which will mainly bring together medical equipment and drugs, including vaccines, to make a new publicly traded company.
“This illustrates a trend that has been underway for more than 20 years and is pushing companies to focus on a single market,” says Michael Useem, a Wharton University professor and specialist in industrial restructuring.
This series of announcements “highlights the fact that the diversified conglomerate, even if it held a huge place in American economic history, is on the way to extinction.”
Last week DuPont, already independent since the 2019 spin-off of the giant DowDupont, also announced a strategic shift and the group’s exit from a portfolio of industrial products.
For Gregori Volokhine, a portfolio manager at Meeschaert Financial Services, at GE, as at IBM, which listed Kyndryl last week, deconstruction is an opportunity to separate the chaff from the wheat.
“For a long time, General Electric had always had a black sheep” among its activities, in this case energy, after being affected by financial services after the 2008 crisis. Since then, “all other branches suffered, in terms of valorization but also of obtaining “resources.
By extension, many of these old conglomerates see their stock prices stagnant, argues Michael Useem, for whom there is a kind of penalty to diversification.