Blue-chip companies announced corporate spinoff plans during the hot IPO market of 2020 and 2021.
The IPO market has soured, but Kellogg's plan to split into three companies focused on cereals, snacks and plant-based foods shows how long-term thinking can lead to the right kind of deals under any market conditions.Kellogg announced it is splitting up into three new companies. Its decision speaks to the kind of long-term thinking about core growth opportunities that should be on the minds of C-suites regardless of peaks and valleys in investor appetite for deals, and may in fact be even more important as economic growth slows.
Research conducted by Emilie Feldman, an expert on corporate divestitures at the The Wharton School, University of Pennsylvania, indicates that there is always a market timing element to divestitures, and companies seek to do spinoffs and other public offerings when market conditions are favorable. But it is also true that when market conditions soften, some of this calculus might shift.
"The prevailing logic for divestitures might be to use them to focus on core assets that have the greatest future prospects," Feldman said."This is exactly what I think is happening with Kellogg … get out of businesses where future growth potential and prospects might not be as favorable, and then focus on businesses where prospects might be stronger."