Over the past five years, the industrial automation market has undergone substantial transformation, prompting major players to divest significant parts of their portfolios in favor of key growth segments like industrial software. Honeywell—one of the last remaining conglomerates—recently announced plans to spin off its automation and aerospace businesses following pressure from activist shareholders, aiming to emulate the successful breakup strategy employed by GE. According to equity research analysts, Honeywell’s underperformance in recent years is partly a result of its complex conglomerate structure, which can obscure strong performance in areas such as aerospace.
While there are potential drawbacks to splitting up Honeywell—such as the risk of losing operational synergies or incurring additional overhead costs associated with separate corporate structures—the potential benefits are considerable. Equity research analysts point out that separating Honeywell’s businesses would allow management to focus more cohesively on each entity’s core strengths, pursue a pure-play strategy, and ultimately create leaner, more agile companies. This enhanced agility would enable each standalone business to respond more quickly to shifting market demands and seize emerging opportunities in its respective end markets.
