Over the past few years, there has been a significant increase in the volume and size of corporate spin-offs, with nearly 25% more spin-off transactions in the U.S. in the decade leading up to 2025 than between 2005 and 2015[1] The trend continues to accelerate, with 31% more U.S. spin-offs in 2024 compared to 2023, and 2025 up even more (36%[2] from 2023). The value of spin-offs is also increasing, with 20 spin-off announcements raising $12.8 billion in 2024[3]. This valuation jump reflects a shift in the spin-off market and the market overall, as valuations continue to climb and companies pursue larger, transformative separations instead of smaller scale spin-offs to streamline or optimize a portfolio. And as valuations get higher…so do the stakes.
Why so many spins?
There are a number of factors that may be playing into this trend. Conglomerates were popular for most of the 20th century, but the synergies and efficiencies this business model promised often ultimately failed to come to fruition. As a result, the market has increasingly assigned “conglomerate discounts” to these behemoths, which often don’t exceed the performance of standalone, single-industry enterprises favored by investors wanting to select their own diversification plays. So, are conglomerates a thing of the past? Not quite – but spin-offs are indeed the M&A trend of the moment.
Zooming in, a spin-off is also an excellent way to offload (expensive) debt to improve the balance sheet of the parent company and solve for competing priorities among business units, such as differing capital allocation needs. It can also enable a company to skirt regulatory scrutiny associated with traditional M&A to grow a core business unit with greater focus, runway and resources. And let’s not forget external pressure – activist investors are often pushing an M&A thesis, and right now we’re seeing activists pushing for divestitures and spin-offs. Some companies may be responding to direct activist pressure while others may be taking a preemptive approach, pursuing a spin-off before an activist comes knocking with the same request.
So, you’re announcing a spin-off…
Announcing a spin-off is trickier than a standard acquisition, divestiture or whole company sale for a variety of reasons. Unlike a traditional sales process, the parent company doesn’t hold 1:1 conversations with potential buyers to assess feedback and refine its messaging for the public audience while working through the negotiation process. In contrast, the messaging and rationale goes straight to the public, including shareholders, analysts and reporters on announcement day. The initial response from these audiences can make or break an announcement and impact the spin’s success well before SpinCo rings the bell on listing day.
Key communications considerations for a spin-off in 2026
#1: “We’re just in different places right now” – The balancing act
A spin-off naturally raises questions about the performance of the standalone business: if the business is performing well, the obvious question is why RemainCo is better off without the piece that is being spun out and why SpinCo will do better on its own. If SpinCo is performing poorly, the challenge is even bigger, given shareholders in RemainCo are typically offered shares in SpinCo – particularly for larger spins. It’s a delicate balancing act to appease investors who may be clamoring to offload a declining asset without jeopardizing SpinCo’s future as a standalone company. Striking this balance necessitates both a clear vision for SpinCo’s potential on its own – greater focus, clear strategic and capital allocation priorities and a dedicated management team and board – while articulating RemainCo’s strategy to create greater value and sharpen focus without this asset. With a strong point of view on the go-forward equity story for both companies and a plan to design future standalone organizations to enable that outcome, companies can spell out the long-term strategic and financial benefits and most importantly, how these benefits outweigh the one-time costs and dis-synergies associated with a spin.
#2: “I’m taking the kids” – Don’t forget employees are breaking up too
It is similarly critical to balance internal communications in any spin-off, as employees will seek clarity on the rationale behind the separation, how the split will impact their roles and if SpinCo might pursue additional M&A down the line or be an acquisition target – both of which could create further instability for employees. From an operational perspective, detangling functions across internal teams can be complex, and you can’t ignore that employees have emotional ties to each other and to the identity of the company they work for, and they may feel strongly about parting ways or being “left behind.”
Set a cadence for regular updates to employees on the separation process and focus on maintaining employee morale so both companies can retain talent. Try to maintain a “favored nations” approach and signal that RemainCo and SpinCo will both be great places to work, with bright futures, strong cultures and opportunities for advancement. And for some companies, if employees have equity and the opportunity to participate directly in the success of SpinCo, don’t forget these employees are not just talent but a shareholder base as well.
#3: “When one door closes, another opens” – RemainCo will drive the initial narrative, but not the final story
While landing the initial announcement is critical, it is just the first step of a lengthy process to execute the spin and hit the public markets. RemainCo should leverage both spin milestones and ongoing opportunities for investor engagement to underscore the rationale for the spin and reiterate the path forward. SpinCo in turn must prioritize setting up communications and investor relations infrastructures to maintain its own independent updates and prioritize direct engagement with future employees, investors and analysts, before launching an investor roadshow and ultimately making a splash on listing day. SpinCo should be stepping out to tell a story that ties into the initial RemainCo announcement narrative but also focuses on where SpinCo is going (and less on where it came from).
#4: “Leave something to the imagination” – Don’t show all your cards at once
Companies should be strategic about what and how much information they share regarding the future of SpinCo on announcement day – including branding, the official SpinCo company name, key management and director appointments, headquarters, etc. Revealing CEO appointments, especially from the existing executive team, can be a great way to communicate stability and continuity, but the entire C-Suite doesn’t need to be named in the initial announcement. It is also important to maintain investor interest in the spin and strategically sharing key management and Board announcements as well as other milestones throughout the process enables SpinCo to generate news and engage stakeholders in the lead up to listing day.
It’s not you, it’s the market…so let’s see other shareholders
Communicating the rationale for a spin and understanding the existing sentiment among key stakeholders will be vital to a successful transaction. The best way to prepare for a spin-off is to maintain investor relations best practices so you can see around corners and anticipate questions, reactions and potential holes in the narrative. If you know that investors and analysts are already interested in a spin, or an activist has publicly pushed for it, the groundwork may be laid for a breakup, but the work is far from done and you have a long path to achieve a successful “conscious uncoupling.”
Looking ahead to 2026, we have our eye on the consumer-packaged goods sector (CPG) as a hot industry for more spins. We’ve already seen spin-off announcements at major players looking to detangle their portfolios and manage industry headwinds, including inflation, tariffs, supply chain complexity and risk, pricing pressure, shifting consumer preferences and heightened competition – and we think this trend is likely to continue. Don’t rule out activity in the pharmaceuticals sector either. In a tight funding environment with uncertain regulatory pathways, biotech companies may look to spin-off early-stage assets with costly development processes or long paths to commercial approval to help raise capital and enable operational focus on the essential late-stage assets with the most promise. We expect 2026 to be a big year for whole company M&A as well, building on strong momentum in 2025, but the market dynamics driving spins and divestitures in 2025 – valuation challenges, debt, differing capital allocation priorities, activist pressure and regulatory scrutiny, – seem to be here to stay.
[1] Mergermarket Data
[2] Mergermarket Data
[3] LSEG Data