Breaking Up Is the New Thing to Do - Larger companies splitting in two
In the aftermath of the financial crisis, investors bet on companies that seemed too big to fail. Even if a business wasn’t growing at breakneck speed, there was safety in large numbers; the more sales the better, it seemed.
So in 2011, when Hewlett-Packard hastily announced a plan to break in two, investors balked. Separating HP’s personal computers unit from its enterprise products and services seemed a risky bet that could leave both halves vulnerable. That plan was shelved, and the chief executive who proposed the split was summarily dismissed.
But today, stock market investors are betting on companies with tightly focused visions. Too many divisions are seen as a distraction for management. And activist investors are eager to take small stakes in big companies and call for breakups, betting that profit will follow.
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“A move like this a few years ago might have looked like a fire sale,” Mr. Burris said. “Now, this move improves its focus, simplifying some of the complexity.”
Ralph V. Whitworth, the activist investor who gained a seat on HP’s board, hailed the split on Monday as a victory for shareholders, a reminder of the degree to which the decision was motivated by financial concerns.
The separation is “a brilliant value-enhancing move at the perfect time in the turnaround,” Mr. Whitworth said. “Shareholders will now be able to invest in the respective asset groups without the fear of cross-subsidies and inefficiencies that invariably plague large business conglomerates.”
http://dealbook.nytimes.com/2014/10/06/breaking-up-is-the-new-thing-to-do/?_php=true&_type=blogs&emc=edit_th_20141007&nl=todaysheadlines&nlid=45299538&_r=0
Working for a company that is going through a split is a nerve wracking experience, you don't know where you will fall or if you might even fall out in the shake up.