WEEK 13 ALREEN MERGERS ACTIVITY...

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1 Activity 13 Alreen Sorathiya University of the Cumberlands BADM 625 – M50 Mergers & Acquisitions Peter A. Lennon CPA MBA J Nov 24th, 2023

2 Activity 13 Corporate Split A corporate split happens when a firm chooses to split up one or more of its subsidiaries or business divisions. It is also referred to as a spin-off or divestiture. Such a strategy shift might have a variety of reasons, but it is frequently motivated by the goal to increase shareholder value, boost operational effectiveness, or return attention to core capabilities. A number of variables probably played a role in Dow Chemical's 2014 and 2015 decisions to sell subsidiaries and separate out particular business divisions ( Wright & Tabbert, 2022) . Streamlining operations and focusing on core business activities are two of a company's main motivations for separating off a division. A corporation can focus more of its resources, attention, and capital on areas where it has a competitive edge or sees more growth potential by selling off non-core or underperforming parts. It is possible to view Dow Chemical's strategic decision to sell off companies like Sodium Borohydride and Angus Chemical Company as an attempt to concentrate on its core materials and chemical businesses. Corporate splits are also largely driven by operational efficiency. A more flexible and agile organizational structure might result from the divestiture of some divisions, enabling the surviving business units to take advantage of new opportunities and quickly adjust to changes in the market ( Ervits, 2021) . Companies can improve overall operational performance, streamline procedures, and cut down on bureaucracy by getting rid of non-core assets. This justification is supported by Dow's choice to sell a portion of its fleet of rail cars in North America, which frees up the corporation to focus on its core skills rather than being sidetracked by the hassle of managing auxiliary assets.

3 In order to maximize value for shareholders, corporations may also decide to pursue a corporate split. A corporation can raise funds through the sale of some divisions or subsidiaries and use that money to pay off debt, fund expansion plans, or give dividends or share buybacks back to shareholders ( Smith, 2021) . This approach is especially appealing to companies that feel that the market valuation of the firm as a whole undervalues each of its constituent divisions. It's possible that Dow Chemical made the decision to split up its global chlorinated organics, epoxy, and U.S. Gulf Coast chlor-alkali/chlor-vinyl businesses in order to unlock value and build a more concentrated, value-driven portfolio. But it's important to recognize that there are hazards associated with business splits, and that reverse synergy is something to think about. Even though the main objective of the divestment is to generate wealth, it's possible that the divided business units won't function as well on their own as they did while they were part of the corporate organization ( Antonowicz & Colaguori, 2023) . The loss of elements like economies of scale, synergies, and shared resources between several business units could result in higher operational expenses for the divested organizations. In order to guarantee that the split maximizes total shareholder value and to reduce the danger of reverse synergy, companies need to thoroughly assess the possible effects on each business unit. Businesses looking to streamline their operations, maximize shareholder value, and concentrate on their core skills have adopted a similar strategy, as seen by Dow Chemical's strategic decisions in 2014 and 2015 to sell subsidiaries and separate out particular business units ( Baggott, 2023) . Even though increasing shareholder returns and increasing efficiency are frequently the driving forces behind these corporate splits, businesses must carefully manage any

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4 potential risks related to reverse synergy in order to protect both the remaining core business and the divested entities' long-term success.

5 References Antonowicz, D., & Colaguori, C. (2023). Corporate Crime and Wrongdoing and White-Collar Crime. Crime, Deviance, and Social Control in the 21st Century: A Justice and Rights Perspective , 315. Baggott, M. J. (2023). Learning about STP: A Forgotten Psychedelic from the Summer of Love. History of Pharmacy and Pharmaceuticals , 65 (1), 93-116. Ervits, I. (2021). CSR reporting by Chinese and Western MNEs: Patterns combining formal homogenization and substantive differences. International Journal of Corporate Social Responsibility , 6 (1), 1-24. Smith, N. J. (2021). Determining the effect of mergers and acquisitions in the agricultural supply sector (Doctoral dissertation, North-West University (South Africa)). Wright, M., & Tabbert, U. (2022). Restorative Environmental Justice with Transnational Corporations. In The Palgrave Handbook of Environmental Restorative Justice (pp. 643- 666). Cham: Springer International Publishing.

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