The UK’s industrial conglomerates were once a cornerstone of the domestic market. But the FTSE 100 this year lost the last of those diversified engineering and manufacturing businesses, with the break-up of Smiths Group and the slimming down of DCC.
After decades of retreat by public market investors from the sprawling business models, the unravelling gathered pace in recent years as private equity groups scooped up unloved industrial assets and technology further tilted the argument away from conglomerates.
“The whole model of the UK-listed industrial [sector] has changed dramatically,” said Harry Philips, research analyst at Peel Hunt. “We no longer have the sprawling conglomerates of old.”
Smiths, which sold off its detection and electrical connectors businesses, had been a candidate for a break-up for more than a decade after it sold its aerospace division in 2007, analysts said. But it resisted such calls until the beginning of 2025, when activist investor Engine Capital sent a letter to the board calling for a strategic review or sale.
After the sale of two of its four businesses in quick succession, shares in the company, which now consists of engineering component makers John Crane and Flex-Tek, have risen by a third since the start of 2025.
At DCC, divestments are progressing at pace. The company, which was once a diversified conglomerate with interests ranging from service stations to nutritional supplements, plans to focus on energy. It signed off on the sale of its healthcare unit in September and plans to complete the sale of its technology division by the end of 2026.
The result, said analysts and bankers, is that London’s public markets will enter the new year with no large sector-spanning industrial groups.
“You don’t actually have real large conglomerates any more because when you go north of a £1bn market cap all the companies are quite pure play,” said Rob Jurd, head of European industrials at RBC.
The so-called conglomerate discount has long been a driver for break-ups and spin-offs. Imperial Chemical Industries, the vast British conglomerate behind such products as Dulux paints and Perspex, began its 15-year-long break-up in 1993. Hanson, the group built up by swashbuckling corporate raiders Gordon White and James Hanson, embarked on its own demerger three years later, splintering into smaller groups including Imperial Tobacco.
The case for the divestments now, as then, is that slimmed-down businesses attract higher valuations than hulking cross-sector groups, because they are easier for investors to understand and can react faster to market shifts.
It is an argument that has also won out beyond British shores.
Honeywell, one of America’s last big industrial conglomerates, announced plans to spin off its aerospace division as part of a three-way split. It came after activist investor Elliott Management amassed a $5bn stake in the century-old industrial group and called for a break-up.
Meanwhile in Germany, industrial groups across the spectrum are contemplating sales as they race to get leaner amid stiff competition from China.
Chemicals giant BASF agreed a €7.7bn deal to sell its coatings business to US private equity firm Carlyle. It is also planning to divest its agriculture division in a 2027 initial public offering. Essen-based Thyssenkrupp is in the process of selling or spinning off its five main divisions into separate businesses and turning the conglomerate into a holding company.
“The idea that an investor will buy a broad-based conglomerate business that can generate 4.5 to 5 per cent return per cycle has gone out of fashion,” said Philips, at Peel Hunt.
Over the past two decades, the argument has shifted further away from conglomerates because of technology, said Martin Wilkie, a senior equity analyst at Citigroup.
Whereas once, smaller businesses going it alone faced logistical hurdles, today “you can run a company and have access to phenomenal supply chain technology and enterprise software, and you’re paying monthly for it”, he said. “You don’t need to be some massive multinational to get that anymore.”
Analysts said that in place of conglomerates, a growing crop of listed “decentralised” groups had emerged, which went out on acquisition streaks but delegated strategic decisions and capital allocation to autonomous business units.
That business model makes companies more nimble, they said, adding that managers were often given incentives with equity stakes and a share of profits in the units they ran.
Halma, the £13bn FTSE 100 group of safety technology businesses, says it acquires small- to medium-sized companies in “global market niches” that are “aligned with our purpose” and have a “strong cultural fit”. It has spent just under £1bn buying up 20 businesses in the three years to September.
While such companies are a far cry from the industrial empires of old, more of the UK’s engineering groups could switch towards a decentralised structure in the coming years, said Andrew Simms, senior equity analyst at Berenberg.
“Many of these businesses are the best in class at what they do, have strong margins [and] cash to deploy and can compete on a global basis,” he said.