Unlocking Value Through Demergers
Demergers are a big deal in the world of business. They’re complicated, but they can also offer huge opportunities for companies looking to refocus, boost profits, or keep their shareholders happy. With mergers and acquisitions on the rise, we’re seeing more and more companies taking the plunge into demergers, splitting off, and spinning off parts of their business all around the globe.
In this installment of our Strategic M&A Series, we’re diving into the ins and outs of demergers. We’ll take a closer look at what it takes to make a demerger successful and how some of the world’s top brands have managed to unlock tons of value by making it work in Europe, Asia-Pacific, and the Americas.
We’re here to help you navigate your own strategic projects and can set up a chat to discuss what demerging might mean for your company.
Three key things to keep in mind when it comes to demergers:
1. **Structure:** Every demerger is unique, so it’s important to tailor the deal to fit your company’s goals and the needs of your shareholders. Demergers are not one-size-fits-all, so it’s crucial to get the structure just right.
2. **Readiness for Listing:** If you’re planning to list the newly separated entity, make sure everything is in order from day one. People, governance, and policies should be ready to go, and you need to have a solid plan in place to get investors excited.
3. **Separation:** Breaking up isn’t easy, but with careful planning and coordination, it can be a smooth process. Managing transitions across different parts of the business, especially in multiple countries, takes time and effort.
When it comes to choosing the right path for your demerger, there are a few options to consider:
– **Demerger:** This involves fully separating the businesses right away or keeping a stake in the new entity. It can lead to growth in share prices for both groups, but it won’t generate immediate proceeds for the existing group.
– **Minority IPO:** This route means a slower separation of businesses but an opportunity to cash in on the retained stake over time. It requires a strong equity story and interest from new investors.
– **Sale:** Selling off part of the business is another option. It’s a quicker process with fewer disclosure requirements, but finding a buyer can be tricky for larger companies.
Key considerations for a successful demerger:
– **Tax:** Make sure to plan for the tax implications for shareholders, the new entity, and the parent company. Engaging with tax authorities early on is crucial.
– **Structuring:** Decide on the best structure based on the parent company’s objectives. Think about where to list, the capital structure, and the financial needs of the new entity.
– **Documents and Listing:** Prepare all necessary documents, including the prospectus, and get your internal teams on board early. Financial disclosures can be time-consuming, so having the right support is key.
– **Separation:** Ensure a smooth transition by planning for operational changes and engaging with all stakeholders throughout the process.
Demergers might be complex, but with the right strategy and support, they can be a valuable move for companies looking to realign their focus and unlock new opportunities.
