Corporate breakups and spinoffs are back on Wall Street — but are investors up for the ride?

Bankers love to put companies together, helping executives piece together acquisitions in pursuit of scale, synergies, and seriously huge advisory fees. And they also don’t mind doing the opposite.

Indeed, corporate America’s hottest new trend in dealmaking is breaking up. Spin offs among S&P 500 companies are running at their fastest pace since 2016.

So far this year, plenty of household names opted to split themselves apart: industrial giant HoneywellH is dividing into three, while Warner Bros. Discovery said in June it would separate its TV networks from streaming and studios.

Keurig Dr Pepper plans to separate its soda and coffee businesses after completing its $18 billion acquisition of JDE Peet’s.

And Kraft Heinz will spin off its grocery arm, shedding Kraft-branded staples like boxed mac and cheese and frozen meals.

What’s fueling this corporate uncoupling? According to the WSJ, a big driver is activists pushing back against bloated empires. Their argument? Fast-growing divisions get dragged down by sluggish ones, and those much-hyped “synergies” from megamergers hardly show up. That logic has led to some past megamergers being undone.

But whether these corporate divorces actually pay off is another story.

The Takeaway

In the first 18-24 months following the split, companies spun off do tend to outperform the S&P 500 by ~10%, according to Trivariate Research — but those early gains might not hold up over longer time horizons. Since its 2015 launch, the S&P US Spin-Off Index — which tracks $1 billion+ S&P 500 companies spun off in the last four years — has lagged behind the main S&P 500 Index.