MERGER

A merger is a deal to unite two existing companies into one new company. There are several types of mergers and also several reasons why companies complete mergers. Most mergers unite two existing companies into one newly named company. Mergers and acquisitions are commonly done to expand a company’s reach, expand into new segments, or gain market share. All of these are done to please shareholders and create value.

There are five main types of company mergers:

  1. Conglomerate: nothing in common for united companies
  2. Horizontal: both companies are in same industry, deal is part of consolidation
  3. Market Extension: companies sell same products but compete in different markets
  4. Product Extension: add together products that go well together
  5. Vertical Merger: two companies that make parts for a finished good combine

DEMERGER

A demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or more components. It is the converse of a merger or acquisition. A demerger can take place through a spin-off by distributed or transferring the shares in a subsidiary holding the business to company shareholders carrying out the demerger. The demerger can also occur by transferring the relevant business to a new company or business to which then that company's shareholders are issued shares of. In contrast, divestment can also "undo" a merger or acquisition, but the assets are sold off rather than retained under a renamed corporate entity. Demergers can be undertaken for various business and non-business reasons, such as government intervention, by way of anti-trust law, or through decartelization

  1. all the property of the undertaking, being transferred by the demerged company, immediately before the demerger, becomes the property of the resulting company by virtue of the demerger;
  2. all the liabilities relatable to the undertaking, being transferred by the demerged company, immediately before the demerger, become the liabilities of the resulting company by virtue of the demerger;
  3. the property and the liabilities of the undertaking or undertakings being transferred by the demerged company are transferred at values appearing in its books of account immediately before the demerger;
  4. the resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis;
  5. the shareholders holding not less than three-fourths in value of the shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the resulting company or, its subsidiary) become share-holders of the resulting company or companies by virtue of the demerger, otherwise than as a result of the acquisition of the property or assets of the demerged company or any undertaking thereof by the resulting company;