Wall Street is falling in love with the corporate breakup. Here's why.

Economic

Summary:

U.S. corporate breakups surged to \$725B in 2025, up 48%, as firms spin off units to cut debt, boost returns, or appease activists. Deals span food, beverage, finance, and media sectors.

This year is turning out to be a big one for breakups.

Whether by offloading a business unit, spinning out a corporate arm through an IPO, or carving up a Fortune 500 company, that means more fees for bankers and potentially improved returns for investors.

Through the end of July, US firms announced $725 billion in corporate breakup deals this year, according to the most recent data from Dealogic. That's a 48% jump from last year's level of divestiture activity over the same period.

"There's a lot of companies staring at their portfolios and wondering, 'Am I the best owner for these assets?'" Kevin Desai, head of PwC's deals team, said in an interview.

Fodder for some of this year's biggest splits: past mergers that no longer work. Those companies need a change, whether it's to pay down debt, cut costs, or boost a lagging stock price, according to Desai.

"You're not getting credit for being a large, diversified conglomerate anymore," he added.

Earlier this week, Kraft Heinz (KHC) confirmed plans to end its megamerger consummated a decade ago that its largest shareholder, Warren Buffett, helped mastermind.

Meanwhile, Keurig Dr Pepper (KDP) unveiled plans to buy another coffeemaker, JDE Peets, for $22.7 billion, merging it with its coffee business to then spin out that entity via IPO.

Chemical company DuPont (DD) has agreed to sell its Kevlar and Nomex business to rival Arclin for $1.8 billion, the latest in its decade-long rightsizing effort.

Warner Bros. Discovery (WBD) said it's ending its debt-saddled combo back in June, just three years after its merger.

Over the first half of 2025, the average completed divestiture deal by US sellers, according to PwC data, has swelled to $512 million, more than twice the average for the same period over each of the past two years.

Some of the biggest separations have been within the food and beverage business, where executives and their boards are having to do some "self-reflection." They are trying to adjust to shifting consumer tastes after years of higher grocery prices and a heightened aversion to processed foods.

"We recognize that the complexity of the business was actually leading to not driving the type of performance that we wanted to get to," Kraft Heinz CEO Carlos Abrams-Rivera told Yahoo Finance's Brian Sozzi. The breakup separates the company's slower-growing American food business (hot dogs) from its international condiments and sauces division (ketchup).

"It really has been a thorough review of what essentially was the premise that we believed that there was unlocked value in the company that wasn't truly being assessed appropriately outside," he added.

Keurig Dr Pepper is planning a two-step deal. First, it will acquire European coffeemaker JDE Peets for $22.7 billion and combine the beverage company with its own coffee business. Second, it will spin out that entity through an IPO, the company said last week.

Jif peanut butter maker J.M. Smucker (SJM) officially sold off two baked-good brands, Cloverhill and Big Texas, to JTM Foods for $40 million earlier this year. Those brands came with its $5.6 billion acquisition of Twinkie maker Hostess seven years ago.

Sony plans to spin off its financial services arm through an IPO in late September.

Major lender Citigroup (C) plans to ready itself for a spin-off of its Mexico consumer bank, Banamex, by the end of the year, though market conditions and regulatory approvals could push that to 2026, CEO Jane Fraser told analysts in July.

Longer-term stock underperformance compared to peers is one of the biggest reasons for a corporate split, and that can spur a need for action, especially when activist investors join the conversation.

Over the first half of 2025, the number of activist campaigns rose 16% compared to the five-year average. Compared to the past decade, activist investors waging campaigns have risen a sharper 44%, according to PwC.

This week, Elliott Investment Management, one of the most successful Wall Street firms at waging activist campaigns, took a stake in beverage giant PepsiCo (PEP).

The firm stopped short of calling for a divestment, but it has in past campaigns. US conglomerate Honeywell (HON) said earlier this year that it's separating into three different companies, months after Elliott advocated for a breakup and disclosed a $5 billion stake in the firm.

Breakup activity, PwC's Desai said, "will continue to pick up."

Source: finance.yahoo

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Wall Street is falling in love with the corporate breakup. Here's why.

Source: finance.yahoo

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