Value creation in demerger : a case study on Six Continents PLC.
With a dramatic growth in merger and acquisition activities recorded in the last decade, demerger activities is expected to surge as well, as revealed by a survey of 100 top executives at FTSE 350 and Fortune 500 companies in 2008. Till date, there has been substantial amount of literature reviews o...
Saved in:
| Main Authors: | , , |
|---|---|
| Other Authors: | |
| Format: | Final Year Project |
| Language: | English |
| Published: |
2010
|
| Subjects: | |
| Online Access: | http://hdl.handle.net/10356/35531 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | With a dramatic growth in merger and acquisition activities recorded in the last decade, demerger activities is expected to surge as well, as revealed by a survey of 100 top executives at FTSE 350 and Fortune 500 companies in 2008. Till date, there has been substantial amount of literature reviews on merger and acquisition creating value for shareholders. However, there has not been much conclusive support for value creation following demergers. Therefore, this report seeks to study the actual effects and impact of demergers on shareholders’ wealth. The methodology utilized in this report includes an extensive research of past literature reviews to provide an overview of the potential advantages and disadvantages of demergers. This is followed by a detailed analysis of a specific demerger case of Six Continents PLC, a large international company which had originally comprised of two major businesses – hotels and pub retail.
In order to achieve a multi-faceted study, the pre-demerger and post-demerger performances in the following measures are compared and analyzed: stock prices, price-earnings ratios, financial ratios, economic value added and lastly market value added. After consolidating and comparing the findings from the aforementioned analyses, it is strongly established that value was indeed created for the original shareholders of Six Continents PLC after the demerger. To conclude the case study, various possible sources of value creation for Six Continents PLC are identified, which include an enhanced strategic focus, improved information flow and communication, and improved corporate governance. |
|---|