ACQUIRING AND SELLING – THE CURRENT TREND IN BUSINESS

During the past two decades, we heard almost nothing but news about new deals from the larger U.S. companies, in their efforts to become even bigger and add numerous acquisitions to their stable.

In other words, it was the raging trend during that time period to acquire additional companies and become larger, have a “broader reach.”  It was a rare company that did not fall prey to this “trend” – “everyone who was anyone was doing it.”  Now that the reality of that misguided notion has fully dawned on most large companies and their boards of directors, they are beginning to wonder why it is that they’re selling – and trying to manage – everything from “soup to nuts” so-to-speak.  As a result, there is an equal rush in today’s environment to divide themselves up again and sell off the companies that they acquired.  This appears to be a trend with equal fervor of devotion to that of the original trend to acquire companies.  In other words, “everyone who is anyone is doing it” – to not be thinking about dividing one’s company up is to clearly be “out of the loop.”  I can’t speak to how the trend of acquiring companies got started, back in the 1990s and early 2000s, but this trend of dividing a company up seems to be being pushed by activist investors (read that as: hedge funds who have acquired a small portion of large company and become a very loud voice to have their demands met).  The latest to fall prey to the “trend” is United Technologies Corporation, one of America’s last remaining conglomerates, which has decided to separate itself into three independent companies.  The company holds Carrier Engineering Company, manufacturer of heating and air conditioning systems that racked up $17.8 billion in sales in 2017, and Otis Elevator Company which had $12.3 billion in sales during that year.  United Technologies (UTC) was founded in 1934 as an aerospace company and expects to return to those roots, having recently acquired airplane parts maker, Rockwell Collins Inc.  The current dedication of UTC to the idea of splitting itself up is said to be in response to “investors that are pressuring conglomerates to justify their existence.”  What could be easier to justify than a $65 billion return in 2017?   The company outperformed the broader market in 2017 with a 9.5% rise in its shares.

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