A demerger is a form of corporate restructuring in which the entity's
business operations
Business operations is the ''harvesting'' of value from assets owned by a business. Assets can be either ''physical'' or '' intangible''. An example of value derived from a physical asset, like a building, is rent. An example of value derived fro ...
are segregated into one or more components.
It is the converse of a
merger or acquisition.
A demerger can take place through a
spin-off by distributed or transferring the shares in a subsidiary holding the business to company shareholders carrying out the demerger. The demerger can also occur by transferring the relevant business to a new company or business to which then that company's shareholders are issued shares of.
In contrast,
divestment
In finance and economics, divestment or divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm. A divestment is the opposite of an investment. Divestiture is a ...
can also "undo" a merger or acquisition, but the assets are sold off rather than retained under a renamed corporate entity.
Demergers can be undertaken for various business and non-business reasons, such as
government intervention
Economic interventionism, sometimes also called state interventionism, is an economic policy position favouring government intervention in the market process with the intention of correcting market failures and promoting the general welfare of ...
, by way of
antitrust
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...
law, or through
decartelization Decartelization is the transition of a national economy from monopoly control by groups of large businesses, known as cartels, to a free market economy. This change rarely arises naturally, and is generally the result of regulation by a governing bo ...
.
See also
*
Equity carve-out Equity carve-out (ECO), also known as a ''split-off IPO'' or a ''partial spin-off'', is a type of corporate reorganization, in which a company creates a new subsidiary and subsequently IPOs it, while retaining management control. Only part of the s ...
*
Successor company A successor company takes the business (products and services) of the previous companies with the goal to maintain the continuity of the business. To this end the employees, board of directors, location, equipment and even product name may remain th ...
References
Corporate finance
Restructuring
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