AI-Summary – News For Tomorrow
Corporate breakups are surging in 2024, with US firms announcing $725 billion in deals by July, a 48% increase from last year. Companies are reassessing their portfolios, questioning if they’re the best owners of certain assets, according to PwC’s Kevin Desai. Failed past mergers are driving this trend, as companies seek to reduce debt, cut costs, and improve stock performance. Notable examples include Kraft Heinz’s megamerger unraveling, Keurig Dr Pepper’s two-step coffee business spin-off, and Warner Bros. Discovery’s debt-related split. Activist investors, like Elliott Investment Management, are also pushing for divestitures, contributing to the anticipated continued rise in breakup activity.
News summary provided by Gemini AI.
This year is turning out to be a big one for breakups.
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.
Earlier this month, 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.
Warner Bros. Discovery (WBD) said it’s ending its debt-saddled combo back in June, just three years after its merger.
“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.
