Demergers

Demergers are increasingly used as a means to realise shareholder value from the break up and disposal of assets. Typically conglomerates, international organisations and large corporates can realise value from the sale of assets where there is little inter-company synergy, the business has become moribund, or is simply inactive. Alternatively, a demerger can be used as a tool to split assets when a shareholder dispute has arisen or for succession planning purposes.

In addition to realising value this can be used as part of wider reorganisation plans to present a more coherent offering to stakeholders, the market and the world at large. 

A demerger can be achieved via section 110 of the Insolvency Act 1986 whereby a liquidation of a holding company is completed and a demerger agreement is executed to facilitate the transfer of shares or assets into two or more newly incorporated vehicles (“Newcos”). 

A demerger requires careful planning and can typically offer a number of benefits, in particular, it can be considered to be tax neutral although prior agreement should be sought from the tax authorities prior to implementation. At Cork Gully our team can deliver a robust business case for a demerger with a practical plan for the separation of entities. In our experience a highly motivated management team and an effective project plan for the separation process are crucial to a smooth transaction. Our plans are geared to provide support and the optimal tax efficient solution. 

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