# Demerger > Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Demerger > Markdown URL: https://mediated.wiki/source/Demerger.md > Source: https://en.wikipedia.org/wiki/Demerger > Source revision: 1357132540 > License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/) {{short description|Form of corporate restructuring}}A '''demerger''' is a form of corporate restructuring whereby parts of a business are separated into different corporations.{{Cite book|last=Bryer|first=Lanning G.|title=Intellectual property assets in mergers and acquisitions|pages=12.2–12.3|publisher=John Wiley and Sons|year=2002|isbn=978-0-471-41437-7}} It is the converse of a [merger or acquisition](/source/Mergers_and_acquisitions). Companies demerge for various strategic reasons, such as improving the focus within a business or raising capital, and can be forced to do so, in some jurisdictions, due to government intervention to improve market competition. Demerging a public company will often result in an immediate fluctuation in share price. Demerging can also occur prior to the newly formed company or companies being listed on the stock market. ==Types and purpose== A demerger can take place through a [spin-off](/source/corporate_spin-off), where the holding company gains equity in the new corporation that is the same as the loss of equity in the company that demerged. A split-off occurs when multiple new companies are formed from the original business. A partial demerger occurs when the holding company retains a reduced stake in the new company created. Demergers can also occur as a result of [liquidating](/source/Liquidation) a company and transferring assets to new companies.{{Cite web |last=Covell |first=Calum |date=2021-04-22 |title=The benefits and drawbacks of demergers |url=https://growthbusiness.co.uk/the-benefits-and-drawbacks-of-demergers-growthbusiness-guide-1297/ |access-date=2026-05-29 |website=Growth Business |language=en-US}} [Divestments](/source/Divestment) differ from demergers, as they involve selling aspects of an existing business to new owners, in some instances to reverse a previous merger.{{Cite web |title=Funding growth - Methods of growth - Higher Business management Revision |url=https://www.bbc.co.uk/bitesize/guides/z7m47nb/revision/4 |access-date=2026-05-29 |website=BBC Bitesize |language=en-GB}} Demergers can be undertaken for various business and non-business reasons, such as [government intervention](/source/economic_interventionism), by way of [antitrust](/source/antitrust) law, or through [decartelization](/source/decartelization),{{Cite book|last=Krishna|first=K.L.|author2=Uma Kapila|title=Readings in Indian Agriculture and Industry|page=599|publisher=Academic Foundation|year=2009|isbn=978-81-7188-734-7}} as a defensive corporate strategy to avoid government intervention, as a way of improving the focus on the core business and competencies, and when remaining as part of a single business offers little advantage due to different parts of a business not making each part more efficient.{{Cite web |title=Business De-mergers |url=https://www.tutor2u.net/economics/reference/de-mergers-and-divestment |access-date=2026-05-29 |website=www.tutor2u.net |language=en}}{{Cite web |title=Demergers |url=https://www.thetutoracademy.com/revision-notes/demergers/ |access-date=2026-05-29 |website=The Tutor Academy |language=en}} Demergers can occur so a company can increase investment and capital,{{Cite web |title=Demerger Meaning: Spin-offs, Split-offs and Carve-outs Explained |url=https://www.forex.com/en-uk/trading-guides/what-is-a-demerger/ |access-date=2026-05-29 |website=Forex}} and have also been used as a method of preventing a hostile takeover.{{Cite news |title=Demerger: Definition, How It Works, Reasons, and Types |url=https://www.investopedia.com/terms/d/demerger.asp |archive-url= |archive-date= |access-date=2026-05-29 |work=Investopedia |language=en}} ==Examples== An example of a demerger, was [eBay's](/source/EBay) decision to create a separate corporate entity for [PayPal](/source/PayPal), in 2014. The announcement led to a 7.5% increase in eBay's share price. At the time the decision was announced, PayPals growth in revenues was double that of eBay's, whilst significant new entrants such as [Apple Pay](/source/Apple_Pay) had entered the online payments market, increasing competition.{{Cite news |date=2014-09-30 |title=eBay to split off PayPal online payment business |url=https://www.bbc.co.uk/news/business-29423251 |access-date=2026-05-29 |work=BBC News |language=en-GB}} In the same year, 18% of demergers in the US occurred within the technology sector.{{Cite web |last=Kien Pham |first=Peter |date=2014-11-19 |title=The risks and rewards of demergers |url=https://www.weforum.org/stories/2014/11/the-risks-and-rewards-of-demergers/ |access-date=2026-05-29 |website=World Economic Forum}} A [Prudential](/source/Prudential_plc) demerger in 2018 resulted in the creation of M&G Prudential, which would focus mainly on the UK and European markets, whilst Prudential plc would be focused on markets such as Asia and the US.{{Cite news |last=King |first=Ian |date=2018-03-15 |title=Prudential demerger to result in two FTSE 100 companies |url=https://news.sky.com/story/prudential-demerger-to-result-in-two-ftse-100-companies-11289505 |archive-url= |archive-date= |access-date=2026-05-29 |work=Sky News |language=en-GB}} M&G Prudential was subsequently listed on the stock market.{{Cite web |last=Menin |first=Anna |date=2019-10-21 |title=M&G makes debut as Prudential demerger completed |url=https://www.cityam.com/mg-makes-debut-as-prudential-demerger-completed/ |access-date=2026-05-31 |website=City AM |language=en-GB}} When [Associated British Foods](/source/Associated_British_Foods) took the decision to demerge [Primark](/source/Primark) in 2026, the immediate market reaction was its share price falling.{{Cite news |last=Sillars |first=James |date=2026-04-21 |title=Primark demerger aims to maximise potential after successive shocks |url=https://news.sky.com/story/primark-demerger-aims-to-maximise-potential-after-successive-shocks-13534399 |access-date=2026-05-29 |work=Sky News}} To improve focus and attract investors, [Vedanta](/source/Vedanta_Limited) demerged, with the outcome being five separate businesses in 2026, with the demerged companies expected to list on the stock market.{{Cite web |last=Khan |first=Md Zakariya |date=2026-05-05 |title=Explained: Understanding Vedanta’s demerger math and its impact on shareholders |url=https://www.fortuneindia.com/business-news/explained-understanding-vedantas-demerger-math-and-its-impact-on-shareholders/135917 |access-date=2026-05-29 |website=Fortune India |language=en}} == See also == * [Equity carve-out](/source/Equity_carve-out) *[Successor company](/source/Successor_company) ==References== {{Reflist}} {{Corporate finance and investment banking}} Category:Corporate finance Category:Restructuring --- Adapted from the Wikipedia article [Demerger](https://en.wikipedia.org/wiki/Demerger) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Demerger?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.