3.1.3 - Demergers

Question 1

What is a demerger?

Answer 1

a single business is broken into 2 or more components

Question 2

Reasons for a demerger

Answer 2

• lack of synergy
• value of company/share prices fell significantly
• “focus on our core activities”

Question 3

What is Synergy?

Answer 3

together the two firms are greater than the sum of their parts (2+2=5)

Question 4

Demergers for workers

Answer 4

workers - could gain or lose, they could get a promotion in the separate firms, but making the firm more efficient may result in job losses

Question 5

Demergers for businesses

Answer 5

businesses - concentrating on smaller core business, increase efficiency, innovation, loss of economies of scale

Question 6

Demergers for consumers

Answer 6

could gain or lose, better products and cheaper prices -> loss of quality or range of goods. less efficient and less choice for consumers