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Corporate failure and reconstruction
3.2 Methods of unbundling
SELL OFF SPIN OFF
(trade sale) (demerger)
A new entity is created,
where the shares of that
The sale of part of an new entity are owned by
entity to a third party, the shareholders of the
usually in return for entity that made the
cash. transfer of assets into
the new entity.
 used to protect the  no cash is generated.
rest of the business
from takeover, or to  allows investors to
generate cash in a identify the true value
time of crisis. of a business that was
hidden within a large
 may disrupt the rest of conglomerate;
the organisation if key
staff or products from  should lead to a
within the entity are clearer management
part of the business structure
unit sold off.
 reduces the risk of a
takeover bid for the
core entity.
 may disrupt the rest of
the organisation if key
staff or products from
within the entity are
part of the business
unit sold off.
MANAGEMENT
BUYOUT (MBO)
Purchase of a business
from its existing owners
by members of the
management team,
generally in association
with a financing
institution.
 loss of head office
support and quality of
the management
team are key
considerations
 several institutions
specialise in providing
funds for MBOs e.g.
venture capitalists,
banks, private equity
firms, and other
financial institutions.
 a management buy-in
(MBI) is similar, but
here the management
team comes from
outside the business.
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