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.
A demerger can take place through a
spin-off by distributing 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
A market intervention is a policy or measure that modifies or interferes with a market, typically done in the form of state action, but also by philanthropic and political-action groups. Market interventions can be done for a number of reas ...
, 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.
See also
*
Equity carve-out
*
Successor company A successor company takes the business (products and services) of a previous company or 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 m ...
References
Corporate finance
Restructuring
{{Finance-stub