De Merger

In the article below, information about de merger has been provided. A de merger may have many advantages as well as disadvantages. Many tools to effect changes in the corporate structure of a company has been worked out, which assists in carrying out the same.

Just as mergers are captivating, de mergers can be interesting too. There are instances when a big company gets transformed into a smaller firm due to selling of its subsidiaries. De mergers may be appealing to the shareholders of a company. There are various tools available for bringing about this restructuring process.

Tools for de merger:

The following tools are used for carrying out the process of de merger:

  • Equity carve outs
  • Sell offs
  • Tracking stock
  • Spin off

Equity carve outs:

Shareholder value gets enhanced by the use of this de merger method of equity carve outs. In this process, a subsidiary belonging to a parent firm is made public by IPOs or initial public offerings. This results in the sell off of shares partially. A new firm, which is publicly listed comes into being. However, the controlling power remains in the hands of the parent firm.

This process is embraced when it is found that the subsidiary is progressing at a faster pace than the parent company.

Sell offs:

When a subsidiary of a parent company is sold off, the process is referred to as a “sell off”. Sell off is carried out in case of subsidiaries, which do not find a place in the core strategy of the company.

Tracking stock:

A special type of stock is used to keep track of the value of any one segment of a firm. A publicly held company issues the tracking stocks.

Spin offs:

Spin offs occur when a subsidiary company gets the status of an independent entity. Under such circumstances, shares belonging to the subsidiary are distributed by the parent firm by means of stock dividends.

Advantages of de merger:

The advantage of de merger is that the shareholders get access to better and updated information about the business as separate financial details are provided.

Disadvantage of a de merger:

Since the size of the de merged firms are smaller than those of the parent firm, tapping the credit market may be a difficult task especially for a small company who may not be able to afford the expensive finances.


More Information on Merger � Acquisition
Benefits of Merger and Acquisition Merger � Acquisition Failure Valuation in Merger and Acquisition
Merger Acquisition Process International Merger � Acquisition Merger � Acquisition Deal
Impact of Merger and Acquisition Merger Acquisition Costs Merger � Acquisition Insurance
Merger Acquisition Accounting History of Merger and Acquisition De Merger
Difference between Merger and Acquisition Hostile and Friendly Takeover Corporate Merger � Acquisition
Reasons Behind Merger and Acquisition Merger Acquisition Law Airlines Merger � Acquisition
Merger Acquisition Strategies Terms in Merger and Acquisition Pharmaceutical Merger � Acquisition
Types of Merger and Acquisition Merger � Acquisition Trends Bank Merger � Acquisition

Last Updated on : 29th July 2013