By Lou Sokolovskiy
A growing number of U.S. companies are betting that smaller is smarter.
On July 18, health-tech firm FOXO Technologies announced plans to spin off its subsidiary, FOXO Labs, a unit developing AI-driven saliva diagnostics. The new company will focus on health coaching subscriptions and wearable device integration, allowing the parent to narrow its strategic scope.
“We believe FOXO Labs… is a strategy that facilitates a simplified business model for each entity,” said Seamus Lagan, FOXO’s CEO, in a company statement.
The move is part of a broader strategy employed by corporations throughout the U.S., where firms across sectors pursue spin-offs to streamline operations, respond to investor pressure, and speed up innovation. Once the purview of industrial giants like General Electric, spin-offs are now a mainstream playbook for growth—and survival.
A Strategic Pivot
Spin-offs are surging. According to Ernst & Young, U.S. deals over $100 million hit $39 billion in the second quarter of 2025—more than double the total from the year-earlier period. Executives say the goal is to focus on core businesses and unlock shareholder value.
This chart is based on data from EY.
“Companies are increasingly pursuing spin-offs as a strategic lever,” EY said in a recent report, calling them a way to “streamline activities.”
Investors are responding. The Bloomberg U.S. Spinoff Index climbed 62% last year. Data from Trivariate Research show that spin-offs have outperformed the S&P 500 by an average of 10% within two years of separation.
Simplify or Lag Behind
Wall Street favors focus. As conglomerates grow more complex, they risk getting discounted by investors who are wary of blurred strategies. Breaking them up creates “pure plays” with targeted missions and tailored risk profiles.
The results can be dramatic. General Electric’s disbanding, for example, created three public companies: GE HealthCare, GE Vernova, and GE Aerospace. Since its debut, Vernova’s stock has jumped 163%, according to data from January. 3M spun off its healthcare division into Solventum while Intel separated its Altera chip unit to sharpen its focus on manufacturing.
Even middle-market firms are making moves. Industrial technology company Fortive and shipping firm Costamare have both executed spin-offs to realign strategies.
What’s Driving the Trend
Several forces are behind the shift. First, investors—especially activists—are pushing for leaner, more focused business units. Second, capital is costly, complicating traditional M&A activity. And lastly, it’s the rising cost and complexity of AI initiatives that demand agility and sharper capital allocation.
Goldman Sachs and EY both note that internal misalignment in diversified firms can hinder performance. Spin-offs allow for more flexible decision-making and distinct capital planning. Bain & Company describes divestitures as “a powerful tool” to simplify and boost performance.
Activists are playing a pivotal role. Elliott Investment Management successfully lobbied Honeywell to spin off its aerospace unit, estimating it could increase the firm’s enterprise value by $32 billion.
Not All Sectors, Not All Wins
The spin-off movement is not hitting every industry equally. In healthcare, companies like 3M and Medtronic are pursuing specialized growth. In tech and industrials, firms are isolating AI ventures from slower-growth legacy units. GE and Intel are clear examples of that shift.
Consumer goods firms are also trimming down. Facing competition from nimble startups and shifting customer habits, companies such as Unilever and Kraft Heinz are paring back. PwC expects continued deal flow in the sector, driven by major divestitures.
Still, not every spin-off delivers. While GRAIL and GE Vernova have seen strong post-spin performance, others—like Solventum and Sunrise Communications—have produced more mixed results.
Some critics argue that spin-offs are occasionally used to offload underperforming units saddled with debt. Academic studies show that even healthy parent firms can falter after a spin-off if disruption costs outweigh the benefits of clarity.
The Modular Corporation
Despite the risks, momentum shows no signs of slowing. The modern enterprise is moving away from the conglomerate model toward what amounts to modular portfolios: focused business units, built to be sold, scaled, or spun off depending on market conditions.
For executives and investors alike, the message is clear—fewer distractions, faster decisions, and simpler stories are the currency of today’s corporate landscape.
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Aug. 2025
