Reasons for demergers
A demerger occurs when a firm separates into two or more independent companies by dividing assets and operations. This represents the opposite of mergers and acquisitions, with divisions becoming separate listed companies or being sold to other firms.
Real World
In 2023, Johnson & Johnson split off its consumer health division (Band-Aid, Tylenol) into a new company called Kenvue, allowing each firm to focus on its core pharmaceutical or consumer strategy.
Exam Focus
Explain that demergers aim to 'unlock shareholder value' — examiners expect you to show how separate valuations can exceed the combined firm's value.
How well did you know this?