Honeywell to Split into Three Entities to Drive Increased Performance of Its Aerospace, Automation, and Advanced Materials Business Units

 

Honeywell to Split into Three Entities

NEWS

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Honeywell will split itself into three separate companies, with planned completion by 2026. The company previously announced its intention to spin out the Advanced Materials portion of its business in October 2024, and is now also splitting the remainder of Honeywell into Honeywell Automation and Honeywell Aerospace. This follows the US$5 billion investment from Elliot Investment Management, which pushed heavily for the split, believing that the new independent elements of Honeywell will drive increased performance and greater share-price value.

Why the Split? What Are the Industry Expectations?

IMPACT

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Honeywell has stated a number of goals and perceived benefits from the split-up of its business units. The simplification of focus for strategy, innovation, and management will allow the companies to focus on leveraging and developing industry best practices and better allocate capital allocation to support distinct automation and aerospace goals. The split will allow each company to have more agility when responding to changing market conditions and innovation, which is highly valuable when operating in the rapidly innovating industrial automation market.

Honeywell’s split is similar to General Electric’s (GE) breakup into GE Aerospace, GE Healthcare, and GE Vernova. These new GE entities have seen strong performance since separating, with financial analysts seeing high potential, driving a notably increase in valuation in the split companies to be a combined 4X larger than GE’s 2022 size. Honeywell is likely hoping to see similar results, particularly in the face of growing demand in the aerospace & defense markets, with GE Aerospace since its split in April 2024 experiencing robust growth, and an increased uptake in digital transformation in manufacturing markets. As Honeywell’s Aerospace is the company’s most profitable business unit, the split, creating one of the market’s largest pure-play aerospace companies, is likely to drive significant opportunity for Honeywell to capitalize on this success, with the new focus allowing the entity to hone its industry best practices and independently develop its portfolio.

Greater Focus on Automation Should Help Honeywell Continue to Succeed in the Process Industry

RECOMMENDATIONS

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The reality is that Honeywell has always had a complex portfolio to manage, with a broad range of products in its automation portfolio in both hardware and software, such as the company’s Experion Distributed Control System (DCS) solutions, ControlEdge automation hardware offerings, and the Honeywell Forge IoT platform. This, combined with being part of the broader Honeywell solutions and served industries, makes it even more challenging to identify standout innovation and strategic direction. A greater focus on the company’s industrial automation positioning as a primary goal of a sole company, rather than being a part of a much larger conglomerate activity, should allow Honeywell Automation a greater chance of success to navigate significant changes underway in the industrial automation market, notably the growth of software-defined automation and Artificial Intelligence (AI).

Honeywell Automation should be able to better compete with more “automation-focused” companies, both long-standing traditional competitors in the process space such as Siemens, Schneider Electric, and Rockwell Automation, and emerging competitors from China, including SUPCON and Inovance. These companies are already making significant innovative progress on the software-defined automation and AI front, and Honeywell will need a stronger and more focused narrative, strategy, and action around its innovation in automation solutions to maintain and grow market share in the process market. While Honeywell has always been associated with its industrial automation competencies, it will be essential for Honeywell Automation to stand out with its own brand and direction following the split. Customers and prospects will certainly want to know how the split will impact roadmaps and portfolio innovation. Honeywell will need to invest heavily in effectively communicating its plans over the coming months prior to the split to instill confidence in direction.

Honeywell Automation has a good opportunity to see greater success in the automation market space, as many manufacturers are now highly open to the adoption of automation and Industry 4.0 solutions, and the company has an established and proven portfolio to build upon. Furthermore, as the augmentation of automation solutions with AI and the development of software-defined automation are still relatively new trends, there is an excellent opportunity for Honeywell Automation to stamp its identity on these technologies and trends. Other leading vendors are making this a priority, and Honeywell Automation will certainly have the tools to do the same.