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Last updated 2:35 PM on 11/27/22
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4 Terms
1
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When does a demerger happen?
when a firm decides to split into separate firms e.g. by spinning off / selling parts of their business
2
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What does a partial demerger mean?
The parent company retains a stake in the demerged business
3
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What are some reasons for demergers?
- raise funds from sale
- a demerged company will be worth more as an independent entity
- unrelated businesses might be separated so the separate businesses can be better appreciated by the market
- profit making subsidiaries might be affected by loss making ones
- management can be properly incentivised and rewarded thereby driving positive outcomes
- a demerged company will be worth more as an independent entity
- unrelated businesses might be separated so the separate businesses can be better appreciated by the market
- profit making subsidiaries might be affected by loss making ones
- management can be properly incentivised and rewarded thereby driving positive outcomes
4
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What happened with Quaker and Snapple?
In 1993 Quaker paid $1.7 billion for Snapple, in just five years Quaker sold Snapple to Triarc beverages for just $300 million, a loss of $1.4 billion. Quaker lost $1.6 million for each day it owned Snapple, which makes exotic juices and iced teas.