Are you considering demerging your company? Do you want to (or have to) separate from the other shareholder(s) and are looking for consulting for this M&A transaction?
Then you have come to the right place. After conducting a profound analysis, the company to be demerged and the demerged companies and their environments will be stochastically simulated.
Call NowA company demerger is a process where one company is demerged (split up) into at least two companies.
The distribution of shares in the demerged companies and any possible compensation payments is carried out using a business valuation method.
Consulting for the demerger of a company especially includes an environmental and a business analysis of the company to be demerged, a business valuation, and support during the demerger process (M&A transaction). A special characteristic of a company demerger is that every single demerged company has to have its own strategy and must be legally and organisationally independent.
The company value in the case of a company demerger is calculated using a model of functional business valuation and is called the decision value, which represents the marginal quota (minimum quota) with possible compensation to the demerged companies. Besides this complex procedure, other methods for calculating the company value should also be considered (e.g., capitalised earnings method and DCF method).
Demerging a company is the counterpart to merging a company. A reason for the demerger of a company can be the dissolution of negative synergies. More often, however, is a disruption between shareholders. A failed merger can also result in a demerger. Another example is that a demerger is intended due to an upcoming inheritance. A testator, for example, wants to leave each child a part of his company so that there are no disputes among the siblings. The conflict situation can accordingly be non-dominated, i.e., voluntary, or dominated (involuntary). Dominated is, for example, the demerger of a conglomerate that has grown too large, has achieved a monopolistic position, and is forced to demerge.
It is important that the objective associated with a demerger is properly thought through. There may well be other solutions to the actual problems that can be solved through good business consulting.
When demerging a company, an environmental analysis and a business analysis of the company to be demerged are important. Subsequently, the company and its environment must be simulated once for the case without demerger and once for the respective demerged companies.
A demerger is a complex process. Each demerged company must function on its own. This means, for example, that employees must be distributed, accounting must be separated, and fixed assets and current assets must be divided. Further, many legal questions arise, such as who is liable for which liabilities and whether the bank agrees to the demerger, as the liability situation changes. It is also essential that each part of the company has a viable business strategy for the period after the demerger.
In the M&A transaction of a company demerger, unlike in a company acquisition or sale, a decision value is calculated as a marginal quota. Often, however, an additional payment can be helpful for fine-tuning. Business units cannot be divided arbitrarily. A business valuation can determine the decision value.
The decision value, the minimally acceptable marginal quota with possible compensation, is calculated in the case of a company demerger using functional business valuation, while argumentation values can be calculated by a series of other methods. In the case of a company demerger, the desire may arise for a neutral arbitrator to determine an arbitration value, which briefly summarises the benefit fairly between the parties.
As can be seen from the above subchapter, the conflict situation is usually multidimensional, i.e., there are many different factors that play a role in the valuation (employee distribution, assumption of contracts, real estate, etc.).
The valuation model for the company demerger takes into account the shareholder's withdrawal structure, other cash flows (if relevant), and taxes. In a pure demerger, the decision value is a marginal quota. It is determined how much of the future cash flow after the demerger must be received at a minimum in order not to be disadvantaged compared to not demerging. Now, a division according to business units usually does not correspond to the decision value. Therefore, there is often a compensation payment. Missing percentages for the quota of the business unit(s) are purchased or excess percentages are compensated through a sale price.
The valuation is carried out by simulation, which means that several thousand scenarios are played out and risks are disclosed.
The (tax) legal consequences of a demerger can be complex and are deliberately not presented here comprehensively. Especially in an international context, when several legal systems collide, it becomes very quickly confusing. But this is rather less dramatic. The company is already confronted with the existence of different legal systems and it is therefore worthwhile to fall back on the corresponding advisors in the respective countries. They already know your company and especially its corporate history and can be available for your area of expertise in the M&A transaction.
I myself have a deep understanding of tax planning in German tax law and this knowledge is maintained. Nevertheless, my focus is on coordinating the M&A process and business valuation. I will not provide tax advice.
A company demerger is a complex process which, as already described, is usually multidimensional. There can be many disagreements and the valuation model will probably need to be adjusted several times. I will be happy to assist you with this. In the event that a company demerger is carried out due to differences between shareholders, the negotiation process can become extremely emotional. It is advisable here that negotiations take place in the presence of external trusted persons to ensure the necessary objectivity.
Use the simulations we have developed together for argumentation in the negotiations. Through the various scenarios and valuation methods, you have a large scope at your disposal.
After the negotiations are basically concluded, it is the task of tax advisors and lawyers to prepare the corresponding documents and analyse legal and tax risks. The focus of my work is on determining the decision value in the case of a company demerger and your consulting. Other experts also have their justification in an M&A process, especially in cross-border transactions.