BROWSE

De-Merger

Definition

A demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or more components. It is the converse of a merger or acquisition.

What is a 'De-Merger'

A de-merger is a business strategy in which a single business is broken into components, either to operate on their own, to be sold or to be dissolved. A de-merger allows a large company, such as a conglomerate, to split off its various brands to invite or prevent an acquisition, to raise capital by selling off components that are no longer part of the business's core product line, or to create separate legal entities to handle different operations.

Explaining 'De-Merger'

For example, in 2001, British Telecom conducted a de-merger of its mobile phone operations, BT Wireless, in an attempt to boost the performance of its stock. British Telecom took this action because it was struggling under high debt levels from the wireless venture. Another example would be a utility that separates its business into two components: one to manage the utility's infrastructure assets and another to manage the delivery of energy to consumers.


Further Reading


Voters' preferences regarding municipal consolidation: Evidence from the Quebec de-merger referenda
www.tandfonline.com [PDF]
… earlier, this potential problem is mitigated by the fact that the merger/de-merger process took … Nonetheless, factors not typically examined in the economics literature may have been influential … Our findings also highlight the influence of a key “non-economic” or “cultural” factor on …

A normative model for local government de-amalgamation in AustraliaA normative model for local government de-amalgamation in Australia
www.tandfonline.com [PDF]
… earlier, this potential problem is mitigated by the fact that the merger/de-merger process took … Nonetheless, factors not typically examined in the economics literature may have been influential … Our findings also highlight the influence of a key “non-economic” or “cultural” factor on …

Financing Growth Through Mergers, Acquisitions and Joint VenturesFinancing Growth Through Mergers, Acquisitions and Joint Ventures
papers.ssrn.com [PDF]
… earlier, this potential problem is mitigated by the fact that the merger/de-merger process took … Nonetheless, factors not typically examined in the economics literature may have been influential … Our findings also highlight the influence of a key “non-economic” or “cultural” factor on …

Review of Company law on Merger and Acquisition in India using SCP paradigmReview of Company law on Merger and Acquisition in India using SCP paradigm
papers.ssrn.com [PDF]
… earlier, this potential problem is mitigated by the fact that the merger/de-merger process took … Nonetheless, factors not typically examined in the economics literature may have been influential … Our findings also highlight the influence of a key “non-economic” or “cultural” factor on …



Q&A About De-Merger


How does this break up of the company occur?

The components are either sold, operated on their own or dissolved.

What other reason might there be for doing this?

Another reason for doing this is if the company has high debt levels from one particular venture, they may want to sell that asset off so they can pay down those debts more quickly and easily.

Who might benefit from such an action?

A conglomerate may benefit from such an action because it allows them to focus on their core products and services while shedding non-core assets. This could help increase stock prices as well.

Why would a company want to do this?

It allows the company to raise capital by selling off components that are no longer part of its core product line and it can also create separate legal entities for different operations.

What is a de-merger?

A de-merger is a business strategy in which a single business breaks into components.