DEMERGERS

Question 1

DEMERGER DEFINITION

Answer 1

This is the breaking up of a firm into separate firms.

Question 2

REASONS FOR A DEMERGER

Answer 2

➳Diseconomies of scale
➳To sell the weak part of the business, profits improved
➳To release money to pay of loans and also reinvest
➳Prevent government intervention

Question 3

DEMERGERS IMPACTS ON BUSINESS

Answer 3

➳May become more efficient
➳Economies/Diseconomies of scale
➳Greater independence
➳Market value likely to increase
➳Sell off unprofitability of the business

Question 4

DEMERGERS IMPACTS ON WORKERS

Answer 4

➳Improvement in manager related relations, less employees
➳More jobs may be created
➳Workers may lose morale

Question 5

DEMERGERS IMPACTS ON CUSTOMERS

Answer 5

➳Improved customer base as competition increases
➳Consumers less confused by the aim of the companies
➳Firms have better focus so better response for customers