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CFO Horizons
Breaking up to move forward: Why CFOs are at the heart of the de-conglomeration trend
In an age that prizes agility, breaking up is a strategy rather than a surrender, argues IMD’s Salvatore Cantale, as CFOs step forward as architects of value in the de-conglomeration era.
When Honeywell announced plans to split itself into three separate companies, it was the logical reaction of a global conglomerate adapting to a market that prizes agility and speed. Activist investor Elliott Management may have added urgency to the imperative, but the company was already set on strategic simplification to unlock value across its portfolio.
The lack of a prolonged and aggressive activist campaign is typical of current de-conglomeration patterns. Large, diversified businesses are quietly and strategically dividing themselves into more focused, agile entities. What might once have been viewed as a retreat is now considered a forward-looking, pre-emptive move to unlock value, sharpen strategic focus, and even accelerate the green transition.
In 2025, the logic for de-conglomeration is no longer just defensive. Today, it’s a strategic move.
Out with the old
The traditional model of conglomerates as sprawling giants, powerful and far-reaching but ultimately slow-moving, is no longer a fit for today’s economic reality. At its peak, General Electric (GE) epitomized this model. Under Jack Welch, GE expanded aggressively into financial services via GE Capital, which eventually accounted for nearly half of its revenue. But the 2008 financial crisis exposed the risks of diversification. GE’s financial arm became a liability, forcing the company into a long process of divestment and simplification.
Corporate leaders learned from the fate of GE. But in 2025, the logic for de-conglomeration is no longer just defensive. Today, it’s a strategic move.
A good example is GSK’s 2022 spin-off of Haleon, its consumer healthcare division. The aim was to create two entities that could move faster than the one they came from. As a standalone company, Haleon had the agility to accelerate product innovation and respond to consumer trends. Similarly, a slimmed-down GSK could focus on the design and production of high-value drugs. The separation helped both entities sharpen their focus and move at the speed their respective markets were demanding.
In today’s business environment, the pressure to launch new products, react to market shifts, and pivot away from global disruptions faster than the competition is acute. Simplification is no longer a luxury; it’s a necessity.
De-conglomeration as a catalyst for sustainability
While financial considerations often drive de-conglomeration, sustainability is increasingly becoming a central motivator. Siemens’ 2020 spin-off of its energy division into Siemens Energy exemplifies how strategic separation can enhance a company’s focus on the energy transition.
Post-spin-off, Siemens AG concentrated on digital industries, smart infrastructure, and mobility, while Siemens Energy emerged as an independent entity dedicated to the entire energy value chain. This includes conventional and renewable power generation, power transmission, and related services. The separation allowed Siemens Energy to tailor strategies and investments toward sustainable energy solutions.
Siemens Energy has committed to ambitious decarbonization goals. In 2024, it reduced its Scope 1 and 2 emissions by 55% compared to 2019 and is on track to achieve its target of climate neutrality by 2030. The company focuses on accelerating renewable power, transforming power plants, strengthening electrical grids, driving industrial decarbonization, and securing supply chains. These initiatives are integral to its mission of leading the global energy transition.
This case illustrates how de-conglomeration can empower companies to pursue sustainability objectives more effectively. By establishing focused entities, organizations like Siemens Energy can allocate resources and innovate in alignment with their specific environmental goals and stakeholder expectations.
The expanding role of the CFO
The CFO plays a pivotal role in any de-conglomeration. While the CEO may serve as the public face of the transaction, the CFO is the architect of financial and operational credibility. Their responsibilities span two equally vital imperatives: ‘doing the right thing’ (making the strategic case for the split) and ‘doing the things right’ (executing the separation with precision).
Doing the right thing
At the strategic level, the CFO must help define whether a demerger is the right course and, if so, why.
Only by weighing credible scenarios can the board fully understand not just the potential benefits of separation, but also the risks of maintaining the status quo.
Strategic leadership: The CFO, CEO, and board must collaborate closely to develop and articulate the rationale for the split. This includes the financial benefits: how the de-conglomeration will unlock hidden value andimprove capital allocation, eliminating the so-called “conglomerate discount” (the tendency of the market to value a sprawling, diversified business as less than the sum of its individual components).
But strategic leadership can’t be just about championing one path. It’s about presenting credible alternatives. Finance leaders cannot present a preferred option alongside a clearly unworkable one. This isn’t really a genuine choice! The CFO’s responsibility is to provide the board with multiple, well-developed, and viable alternatives. These may include demerging, restructuring, or identifying new approaches to managing underperforming assets. Only by weighing credible scenarios can the board fully understand not just the potential benefits of separation, but also the risks of maintaining the status quo.
Enabling standalone success: The CFO also plays a forward-facing role, crafting and communicating the investment case for each new entity. This includes defining clear KPIs, articulating capital allocation plans, and providing robust pro forma financials. Whether or not one of the entities is headed for an IPO, investors and analysts need confidence in the future performance and purpose of both businesses.
Doing the things right
Once the decision is made, the CFO shifts gears from strategist to operator.
“The first 6 to 12 months are critical to stabilizing liquidity, ensuring compliance, and executing capital plans.”
Designing the separation: The finance team must define how assets and liabilities will be divided, determine the capital structure of each new entity, and ensure tax efficiency. In many cases, transition service agreements (TSAs) are required to maintain operational continuity during handover. These must be negotiated and managed carefully to avoid post-split friction.
Operational execution: The CFO must ensure that each new entity has a functional financial system and accounts. Each must also have its own sound governance structure. The CFO must ensure the financial and operational independence of both entities. This means putting in place strong internal controls, reporting systems capable of meeting regulatory requirements, and clear lines of financial accountability.
Post-split stewardship: The CFO continues to play a crucial role after de-conglomeration is complete. The first six to 12 months are critical to stabilizing liquidity, ensuring compliance, and executing capital plans. They must also monitor performance and guide capital deployment – whether through dividends, buybacks, or acquisitions – to support each company’s strategic goals.
Moving from scale to focus
Nowadays, bigger is not always considered better. Increasingly, investors value focus, agility, and strategic coherence over sheer monolithic market presence. Done well, de-conglomeration enables all three.
But de-conglomeration should not be viewed as a panacea. Some spin-offs fail to deliver the anticipated value, and not every complex business needs to be broken up. But when CFOs can combine a strong strategic rationale with rigorous financial execution and transparent investor communication, the results can be transformative.
In relation to de-conglomeration initiatives, then, CFOs are not just finance leaders. They are value architects, business designers, and, ultimately, custodians of post-split success. As more companies consider a break-up, CFOs must be ready to build what comes next.
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