Demerger - Theme 3

Demerger:

Seperation of a larger firm into 2 or more smaller organisations often the un-merging of an earlier merger

Reasons for demergers:

• Lack of synergies
  • One part of the firm has no impact on the more efficient and profitable part of the firm.
  • Diseconomies of scale, as lmanagement can work with different parts of the firm.
• Price
  • Demerged firms have higher price than 1 big firm
• Focused companies
  • In the 1970s it was popular to have conglomerates
  • Now popular to have highly focused companies

Impact of demergers

Government:

• Demergers required by the Government by Competition and Markets Authoritiy (CMA), as firm…