3.1 Buisness Growth

Question 1

What are the reasons for demergers?

Answer 1

focusing on core business helps to cut costs, reduce diseconomies of scale risk, raise money from asset sales (share by back) ,synergy dissolution (many mergers fail to enhance financial performance), might be a defensive tactic to prevent investigation from market authorities

Question 2

What are demergers also known as?

Answer 2

Spin offs or divetitures

Question 3

What are some of the impacts of demergers on employees?

Answer 3

job uncertainty, changes in compensation and benefits, create opportunities for company growth

Question 4

What are some of the impacts of demergers on customers?

Answer 4

services disruption, more competition ( more choice and cheaper), contractual changes

Question 5

What are the impacts of demergers on shareholders?

Answer 5

stock price changes ( market adjusts to new entities), different dividend policies, portfolio diversification ( shareholders now own stock in multiple companies), renewed strategic focus of companies allows investors to carefully align objectives

Question 6

What is a key example of a demerger?

Answer 6

Whitbread sold of costa coffee to Coca Cola. Allowed more of a focus on premier inn (hotel expansion in Germany) , more strategic market focus