While demerger announcements were initially greeted with up to a 10% drop in share price, the study revealed a dramatic turnaround within a year of the break up.
According to Deloitte & Touche, which studied the 118 largest demergers worldwide between 1990 and 1999, parent company share prices rose by 12% for a median performer to more than 52% for upper quartile performers – the separated business also fared well, with share price rises of nearly 50% for upper quartile performers.
Angus Knowles-Cutler, a merger integration specialist at D&T, said there was a lack of understanding about demergers, which explained the dip in share price following an announcement.
‘In reality, the potential diseconomies of scale for both separating entities are far outweighed by clarity of purpose provided by the demerger,’ he said.Knowles-Cutler added the frequent hike in share price on announcement of a merger was often justified as the rationale behind the deal.
‘The problems often come from clumsy integration, which has a habit of destroying focus and motivation – the factors that make demergers successful,’ he said.
The Financial Reporting Council has issued guidance regarding the annual reporting of 1,200 large and smaller listed companies. The letter highlighted the key issues and improvements that can be made in the 2016 reporting season
Baldwins Accountancy Group has continued investment in the north-east and appointed David Fish as a director in its corporate finance team
UK M&A activity bounced back strongly in July and August, according to analysis by the deals practice at PwC.
Smith & Williamson has added Jim Clark and Philip Marsden, of Marsden Clark Corporate Finance Limited, to its corporate finance team.