Industrial conglomerates: Spin off in haste, repent at leisure
Asset management IPOs are part of a growing trend to undo conglomerates.
It has happened in the US, notably at General Electric. Now Europe is also dismantling its industrial conglomerates. After this spring’s IPO of Siemens Healthineers, Volkswagen and possibly Daimler are listing their trucks businesses. Continental is listing its Powertrain business. Thyssenkrupp is splitting in two.
By demerging, chief executives might steal a march on Europe’s increasingly vocal activists. And, yes, there is a bank equivalent. Deutsche Bank listed its asset manager, DWS, in March. That followed Crédit Agricole and Société Générale’s equivalent 2015 IPO of Amundi, and in June this year, SocGen listed its car-leasing unit, ALD. Investec announced plans for a London and Johannesburg IPO of its asset manager in September.
Some European banks look just as big and lumbering as the worst industrial conglomerates. Their tentacles reach beyond banking. Asset management is not core to their role as financial risk-takers.
At best, subsidiary listings will draw attention to the group’s best-performing part, re-rating the whole. Berenberg says Amundi merely makes Crédit Agricole a curate’s egg: good in parts but bad as a whole. Yet greater independence can free up both sections to perform better, reducing the burden on management time, and perhaps on costs if the demerged entity is unnecessarily entangled into the parent’s systems and processes.