Corporate separation strategies like carve outs are complex but can be a catalyst for transformation and growth.
Following the global financial crisis, companies embraced the bigger is better philosophy by diversifying their portfolios, engaging in mega-merger activities throughout the past decade. This resulted in today’s complex corporate portfolios where approximately two-thirds of companies listed on the S&P 500 have three or more business segments with over $500 million in revenue.
However, recent financial market uncertainty, coupled with challenging operating conditions and high interest rates, has led companies to re-evaluate their portfolios and pursue corporate separations to position their businesses for success. Markets are increasingly valuing companies that “shrink to grow” and focus on their core businesses. Increased separation activity is evident across all industries, especially industrials and health care.