3.1.3 De-Mergers

Question 1

Why would a demerger occur

Answer 1

• Focusing on the core business - cut costs + profits margins and return to shareholders
• Reduce risk of diseconomies of scale/scope - reducing range of functions
• Raise money from asset sale
• Defensive tactic - from competition authorities

Question 2

What would be an impact on a business due to a demerger

Answer 2

Long terms - higher returns

Short term - cost of selling off part of business

Question 3

What would be the impact on employees of demerger

Answer 3

Expected job losses (although new may occur)

Opportunities for managers and senior positions

Question 4

What would be the impact on Consumers of a demergers

Answer 4

Impact on price - depending on scale of competition