Merger and demerger acquisition news
Corporate Actions - Merger/Demerger
Find all the information you need about listed companies' corporate actions.
| Company Name | Company ISIN | Merged Into | Merged Into ISIN | Type | Merge Ratio | Announcement Date | Merger-Demerger Date |
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What is a Merger?
A merger is a strategic business action that combines two or more companies into a single unified entity. This consolidation can occur through various mechanisms, such as a mutual agreement to merge as partners with equal standing, or the establishment of a brand-new entity that assimilates the merging companies.
Reasons for Merger
Strategic Growth:
Companies may pursue mergers to enter new domains that would otherwise not be feasible.
Operational Synergies:
Mergers can lead to significant operational efficiencies, cost reductions, or revenue enhancements unattainable by the entities on a standalone basis. This might involve trimming redundant operations, optimizing resource allocation, or capitalizing on the combined strengths.
Market Dominance:
Through merging, entities can bolster their market presence, intensifying their competitiveness and diminishing the intensity of market competition.
Risk Diversification:
Mergers enable companies to diversify their operational focus, decreasing reliance on singular markets or product lines, thereby mitigating overall business risks.
Mergers take various forms depending on the nature and industry of the involved parties:
Types of Mergers
Horizontal Merger:
This form involves entities within the same sector that are often competitors, aiming to consolidate market share or achieve scale economies.
Vertical Merger:
This occurs between companies at different production stages within the same industry, such as a manufacturer merging with its supplier or distributor, aiming to secure supply or distribution efficiencies.
Conglomerate Merger:
This type involves entities from distinct business sectors merging with the aim of diversifying and reducing the seasonality of the business.
Let's understand this with an example:
In 1998, two big car companies, Daimler-Benz from Germany (known for luxury Mercedes-Benz cars) and Chrysler from the USA, decided to join together. They wanted to make a new company called DaimlerChrysler AG, with the idea of mixing the best of both worlds: Daimler-Benz's fancy car making skills with Chrysler's popularity among everyday people. They thought this new company would be very successful all over the world by offering different kinds of cars and using new technologies to make better and more efficient cars.
However, even though it sounded like a great idea, things went differently than planned. They faced a lot of problems because the two companies were very different from each other, including how they did business and what they wanted for the future. These issues made it hard for the merger to work as they had hoped. Ultimately, Daimler decided to sell Chrysler in 2007, which meant the end of DaimlerChrysler. This story shows that merging two big companies can be very tricky, especially when they come from different countries and have different ways of working.
What is a De-merger?
A de-merger is when a company splits into two or more separate businesses. This is done to focus better on each business's main goals, increase shareholder value, or meet legal requirements. In a de-merger, the parent company divides its parts to create new, independent companies. Shareholders usually end up owning shares in both the original company and the new ones. De-mergers can help these businesses concentrate on what they do best, making them more efficient and potentially more successful on their own.
Reasons for De-mergers:
Focus on Core Business:
Companies de-merge to concentrate on their primary areas of expertise, improving efficiency and performance.
Unlock Shareholder Value:
Separating into more focused entities can enhance the overall value for shareholders, as individual businesses may perform better independently.
Regulatory Compliance:
Sometimes, regulatory bodies require companies to de-merge to prevent monopolistic practices and promote competition.
Financial Reasons:
Struggling segments of a business can be separated to prevent them from impacting the financially healthy parts.
Strategic Restructuring:
Companies might de-merge to pursue different strategic objectives that are not aligned with each other.
Types of De-mergers:
Spin-off:
A parent company creates an independent company by distributing shares of a subsidiary to its current shareholders, resulting in a separate, publicly traded company.
Split-off:
Shareholders in the parent company are given the option to exchange their shares for shares in the subsidiary, leading to a reduction in the parent company's shareholder base.
Split-up:
The parent company divides itself into two or more independent companies and ceases to exist. Shareholders receive shares in the newly formed companies, proportional to their original holdings.
Equity Carve-out:
The parent company sells a portion of the equity of a subsidiary through a public offering, creating a separate entity but retaining control over the subsidiary.
Each type of de-merger is chosen based on the specific goals and circumstances of the company, aiming to optimize business operations and shareholder value.
Let's understand this with an example:
In 2014, Reckitt Benckiser, a British consumer goods company, spun off its pharmaceuticals division into a new company called Indivior. This move was made so Reckitt Benckiser could focus on its main business in health and hygiene products, while Indivior could concentrate on treatments for opioid dependence. This de-merger allowed both companies to better pursue their specific goals and operate more effectively in their respective markets.
