Early in 2006, the Dutch media concern VNU announced that it would accept the €7.6 billion takeover bid of a private-equity consortium, which, together with activist shareholders, had criticized a large planned acquisition and instead suggested a review of the company’s portfolio of businesses. In January 2007, the British aerospace technology company Smiths announced the sale of its aerospace business to GE after shareholders steadily criticized that unit’s performance relative to peers. A month later, the London-based hedge fund TCI called on the Dutch bank ABN Amro to “actively pursue the potential breakup, spin-off, sale, or merger of its various businesses.”

In a buyout market where suddenly it seems that everything is for sale, companies throughout the world face mounting pressure to actively manage their portfolio of businesses. A new breed of investor, among private-equity firms, hedge funds, and activist shareholders, is aggressively looking for opportunities to create value from portfolio moves in companies the investors regard as too passive. Complicating matters further, companies that do actively manage their portfolios are finding that the traditional “rebalancing” logic of portfolio management—invest free cash flows in more attractive businesses, preferably with synergies to existing ones, and look to build a strong position—often...