ABB, one of the world’s largest industrial robotics and automation companies, recently announced plans to spin off its “Robotics & Discrete Automation” business into a separate, publicly listed entity.
According to ABB chairman Peter Voser, the move is intended to give the robotics business “enhanced focus and agility”, enabling it to capitalize on what ABB sees as a $112 billion market opportunity by 2030.
It’s a bold move by ABB and we will see how – or indeed if – it works out.
Voser said: “We believe that a separate listing will enable the Robotics business to better focus on its own ecosystem, increase flexibility, and attract capital to support its growth.”
ABB CEO Björn Rosengren echoed this, saying: “This is the right time to explore a separate listing. Robotics is well positioned and already operating like a standalone company within ABB.”
But is it really a good idea to spin off business units? Let’s look at a few well-known examples to understand the possible outcomes.
1. Siemens Energy from Siemens (2020)
Spin-off summary: Siemens AG spun off its energy division, creating Siemens Energy, which included its gas turbine, power transmission, and oil & gas businesses.
Outcome:
- Siemens Energy gained independence to pursue decarbonisation and transition-focused strategies.
- The parent company sharpened its focus on digital industries and mobility.
- However, Siemens Energy has faced major setbacks, especially from wind subsidiary Siemens Gamesa, dragging down its valuation.
- Parent Siemens AG, meanwhile, continued steady financial performance.
Verdict: Mixed. Parent benefited from clarity and focus; the spin-off has had financial challenges.
2. GE Healthcare from General Electric (2023)
Spin-off summary: GE spun off GE Healthcare as part of a multi-year restructuring plan to split the conglomerate into three companies (GE Aerospace, GE Vernova, and GE Healthcare).
Outcome
- GE Healthcare had a successful IPO and strong initial stock performance.
- The company was able to reinvest more directly into imaging, diagnostics, and AI.
- GE shares rose post-split, with investors appreciating the transparency and value unlocking.
Verdict: Positive. Both parent and spin-off saw financial and strategic upside.
3. PayPal from eBay (2015)
Spin-off summary: eBay split off PayPal into a separate company to allow both companies to pursue different strategic directions.
Outcome
- PayPal rapidly grew in value post-spin-off, driven by the global boom in digital payments.
- eBay, without PayPal, struggled to maintain the same momentum.
- PayPal’s market cap far surpassed that of eBay within just a few years.
Verdict: Strongly positive for the spin-off. Less so for the parent.
4. Agilent Technologies from Hewlett-Packard (1999-2000)
Spin-off summary: HP created Agilent to house its test and measurement, chemical analysis, and life sciences businesses.
Outcome
- Agilent became a leading player in scientific instrumentation.
- It eventually split again, spinning off Keysight Technologies, which also thrived.
- HP continued its transformation into a consumer-focused tech company.
Verdict: Positive. Agilent and its descendants flourished; HP clarified its identity.
5. Altria Group from Philip Morris International (2008)
Spin-off summary: US-focused Altria was split from international tobacco operations (PMI), with the goal of allowing each to pursue growth in their respective markets.
Outcome
- PMI benefited from higher-growth international markets.
- Altria, although slower growing, was better able to address US regulatory conditions.
- Both companies became more targeted and efficient.
Verdict: Positive. Tailored strategies led to improved agility and investor clarity.
Common themes: What makes a spin-off successful?
Across these examples, spin-offs often succeed when:
- The business has a distinct customer base, growth strategy, or regulatory landscape.
- Management teams are empowered with focus and accountability.
- The spin-off is financially viable and strategically sound.
In many cases, both the parent and the new entity benefit from increased valuation, operational agility, and investment attractiveness.
What can possibly go wrong?
While spin-offs can unlock value, risks remain:
- Scale loss: Smaller companies may struggle with cost efficiencies.
- Investor skepticism: Some spin-offs initially trade at a discount.
- Execution risk: Separate operations can lead to duplicated costs or disjointed strategy.
- Over-optimism: Market conditions or internal challenges may derail the spin-off’s success.
Companies like Siemens Energy show that spin-offs are not automatic successes – especially in volatile sectors or when inherited problems persist.
Force multiplier or financial engineering?
The decision to spin off a business unit can be transformational. ABB’s move to spin off its robotics business mirrors a growing trend in global industry – one that aims to unlock value, sharpen focus, and respond to rapid technological shifts.
When done right, it can be a catalyst for innovation and growth.
But as always in business, execution is everything.
