M&A Activism: The year of the corporate breakup

Key takeaway: Activists are increasingly acting as architects of corporate structure rather than monitors of corporate performance.

For decades, corporate strategy was dominated by the pursuit of scale.

Companies expanded into new markets, acquired competitors, diversified their operations, and built sprawling portfolios of businesses under a single corporate umbrella.

Investors generally rewarded scale, believing that larger organizations could spread costs, generate more stable earnings, and create value through operational synergies.

Increasingly, however, activist investors are making the opposite argument.

Across sectors ranging from industrials and consumer goods to mining and financial services, investors are urging companies to sell divisions, spin off subsidiaries, conduct strategic reviews, and even explore outright sales.

Indeed, the number of U.S. companies facing M&A-related activist demands leapt 50% in the first quarter of 2026 compared with the same period the year before, according to Diligent Market Intelligence. This comes after activist demands to pursue a sale increased 29% year-on-year in 2025.

Rather than calling for incremental improvements to margins or management teams, this data shows that many of today's campaigns are focused on reshaping companies themselves.

Recent campaigns at Devon Energy, Bunzl, Honeywell, Northern Star Resources, and several other large companies serve to illustrate this trend.

Activists become dealmakers

Shareholder activism often centers around operational performance.

Activists identify underperforming companies, build stakes, and then pressure management to cut costs, improve capital allocation, replace executives, or enhance governance practices.

While these tactics remain common, the modern activist playbook increasingly includes strategic review demands.

For example, activist Elliott Investment Management recently called on British business supplies distributor Bunzl to launch a strategic review and possible separation of its North American business.

Elliott is also currently running campaigns encouraging London Stock Exchange Group to examine aspects of its portfolio, and for Australia-based Northern Star Resources to pursue strategic alternatives, including possible asset sales and broader restructuring.

Elsewhere, TOMS Capital is pushing shale producer Devon Energy to move faster on asset sales or explore a potential sale of the company just months after it merged with Coterra Energy.

What links these campaigns is not a belief that management teams are necessarily running poor businesses. Rather, activists increasingly argue that the market is failing to properly value the assets that companies already own.

Today's activists often resemble investment bankers as much as operational consultants.

The return of the conglomerate discount

The intellectual foundation behind many modern activist campaigns is the concept of the conglomerate discount.

Investors often assign lower valuations to companies that own multiple unrelated businesses than they would assign to those same businesses if they were valued separately.

One reason is that complex organizations are inherently more difficult to analyze. Investors may struggle to understand how different divisions contribute to earnings, making it harder to determine the true value of individual assets.

Capital allocation decisions can also become more complicated when management teams are responsible for allocating resources across a diverse collection of businesses with differing growth prospects.

As a result, many investors prefer focused companies with clear strategies and easily understood financial profiles.

Honeywell International's decision to separate its aerospace and automation businesses represents a clear illustration of this trend.

While the company was not facing the same level of activist pressure seen at firms such as Bunzl or Northern Star Resources, the rationale was similar: investors increasingly favor focused businesses with clear strategic identities over diversified conglomerates whose individual assets may be undervalued by the market.

The move is reminiscent of General Electric, which spent much of the last decade dismantling a conglomerate structure and now exists as separate businesses focused on aviation and energy.

The underlying logic is becoming increasingly difficult for boards to ignore. If investors can build diversified portfolios themselves, many activists argue there is little reason for companies to maintain complexity that obscures the value of their underlying assets.

Why boards are listening

Activists have promoted break-ups and asset sales before. What appears different today is the willingness of boards to seriously consider such proposals.

Part of the explanation lies in the broader economic environment.

For much of the previous decade, low interest rates encouraged acquisitions and expansion. Debt was cheap, growth was plentiful, and investors generally rewarded companies that pursued ambitious growth strategies.

Today, higher interest rates have increased the cost of acquisitions and investors have become more selective about capital allocation decisions, particularly at companies facing slower organic growth.

In this environment, boards face increasing pressure to justify complexity.

If a business segment consistently trades at a lower valuation than its peers, investors may ask whether it belongs inside a larger organization. If a company sits on undervalued assets while generating substantial cash flow, shareholders may question whether those resources would be better returned through buybacks or special dividends.

The broader dealmaking environment may also be encouraging boards to consider strategic alternatives. In the UK alone, M&A activity hit $192 billion in mid-May, more than triple the level recorded at the same point last year, according to a recent Reuters report.

Rising deal activity gives boards a clearer path to monetizing assets that may previously have been difficult to sell or separate.

The result is that the arguments in favor of pursuing strategic reviews have become more compelling because of the changing market conditions.

For boards, that creates a difficult choice. Defend the status quo or demonstrate why the whole is genuinely worth more than the sum of its parts.

Does breaking up companies actually create value?

The popularity of break-up campaigns does not necessarily mean activists are correct.

Supporters argue that separating businesses can unlock value in several ways. Namely that pure-play companies often receive higher valuation multiples than diversified groups, and management teams can focus more effectively on a single business.

Pro-break-up investors also argue that capital allocation becomes more transparent, and investors gain greater flexibility to decide where they want exposure.

However, many conglomerates were assembled for legitimate reasons. Business units may share customers, infrastructure, distribution networks, or operational expertise. Separating those businesses can eliminate valuable synergies while creating additional administrative costs.

Critics also argue that some activist campaigns prioritize short-term share price appreciation over long-term strategic development. A break-up that generates an immediate valuation uplift may not necessarily create a stronger business five years later.

There is also the risk that markets overestimate the value of standalone assets.

While investors often assume separate companies will receive higher valuations, that outcome is not guaranteed. In some cases, independent businesses may struggle without the financial support or diversification benefits previously provided by a larger parent organization.

Furthermore, not every strategic review results in a separation. Warner Bros. Discovery, for example, announced plans in 2025 to separate its streaming and studios business from its linear television networks as part of a broader effort to unlock shareholder value.

However, the company ultimately abandoned those plans after receiving acquisition interest, culminating in Paramount's proposed $110.9 billion takeover. The episode illustrates that while investors may identify hidden value within complex corporate structures, the optimal solution is not always a separation. In some cases, a sale of the entire company may offer shareholders a more attractive outcome.

Ultimately, whether a break-up creates value depends on the specific circumstances of the company involved.

The challenge for boards is determining whether complexity is genuinely creating value or simply obscuring it.

Conclusion

Elliott's campaign at Bunzl may ultimately succeed or fail. The same is true of similar campaigns emerging across global markets. What matters more is what these campaigns reveal about a shift in shareholder thinking.

For much of the past two decades, companies were encouraged to grow larger, diversify operations, and pursue scale wherever possible. Today, a growing number of shareholders appear to believe that many organizations have become too complex, too difficult to value, and too slow to allocate capital efficiently.

As a result, activists are increasingly pursuing a different strategy. Rather than trying to fix companies, they are trying to redesign them.

Whether through spin-offs, asset sales, strategic reviews, or outright acquisitions, the goal is to unlock value by simplifying corporate structures and allowing investors to more clearly assess what they own.

If recent campaigns are any indication, 2026 may be remembered not as the year of activist investing, but as the year of the corporate break-up.

Like this article? Sign up for our free newsletter.