What are Demergers: Its Pros and Cons
Mergers and acquisitions are often used by conglomerates to create value. However, in some cases, demergers have also been effectively used. While the workings of mergers and acquisitions are well known to many people, demerger is still considered somewhat of a mystery.
In this article, we will have a closer look at what a demerger is and how it can be effectively used to generate value.
What is a Demerger?
A demerger can be defined as the transfer of a companys business undertakings to another company. The source company, i.e., the company whose undertakings are being transferred is called the demerged company. The other company is often known as the resulting company.
Demergers can be of more than one type. Some examples are given below:
Advantages of a Demerger
Some of the most obvious advantages of demerger have been listed below.
How Demergers Actually Work
In order to conduct a demerger, the following steps need to be followed:
To sum it up, demergers are an effective corporate strategy. They can be used to unlock value as well as to streamline the operations of a firm.
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