Demergers are increasingly being favoured by large companies with a multitude of operating divisions as a means of allowing management to focus on core business areas to enhance operational efficiency and create synergy. Demergers are complex and can be extremely time consuming, requiring expert knowledge of accountancy and legal issues to avoid potential pitfalls.

However, a demerger carried out successfully can provide a company with a new lease of life.

Last year Blitz and Charter, two of the UK's leading AV and broadcast equipment hire companies, demerged from their parent company to form the Blitz Charter Group. Both Blitz and Charter were part of the Evenser Group, which included Melville and Arena Events. In large organisations such as Evenser, where the board of directors represent the different business units, inevitably the directors will have allegiances to their own divisions.

This was the case at Evenser and as a result Charter, and at times Blitz, found working capital being drawn away to other business units. In AV and broadcast equipment hire, capital expenditure is paramount as this enables companies to offer the latest in technology and solutions to customers.

A lack of capital to invest in necessary equipment can have devastating effects, and when faced with a similar situation, a company needs a skilful management team that is interested and deeply committed to the business to ensure stability and long-term survival. After much consideration, Blitz and Charter decided that a demerger was the best way forward.

For a demerger to be successful there needs to be backing from the most important stakeholders, the shareholders. The investors within the Evenser Group consisted of the board of directors from the four companies (Blitz, Charter, Melville and Arena) and a leading private equity house which invested in Evenser as a leveraged build-up. Having first agreed the need for the demerger with the board of directors at Evenser, the private equity house and the principal bankers were then approached with a proposal outlining the demerger.

Evenser's board agreed that a demerger would be in the best interests of all parties. To demonstrate the potential benefits of the demerger, a comprehensive proposal outlining the business objectives and forecasted goals for Blitz and Charter was presented to both the private equity house and the banks.

An extremely effective and organised accountancy department was vital.

They were fully capable of measuring the business performance to report the measurements of current and projected figures speedily. The reports from our accounting team coupled with my experience of business delivery and expert knowledge of mergers and acquisitions helped provide our investors with the confidence and evidence they needed to back our venture.

In any demerger, there are key issues that both accountants and managers need to address carefully, and taxation is critical. If a group, similar to Evenser, is built up by acquisition it is likely to consist of a number of businesses as holding companies, subsidiary holdings, trading companies or as previously trading companies that have become dormant and have been incorporated into other trading units. In this instance there were transactions of transferring business assets into sub-holding companies and eventually up into Blitz Charter.

Expert tax advice helped to avoid unnecessary tax charges during the transfer of assets. Cash is the lifeblood of business. Don't part with it unnecessarily just because you failed to consider the tax issues involved.

Where leveraged finance is involved, accountants should pay particular attention to financial assistance, when a company can use assets within the business to assist in acquiring its own shares. There are a number of detailed criteria for financial assistance. As the process involves a statutory declaration of solvency from the company, supported by an auditor's report, it is vital that your business's trading plans, particularly for the immediate future of 12 to 24 months, are accurate and clearly stated. Give yourself headroom to prepare your reports as the entire process can be time consuming and meticulous planning is a must.

The consequences for directors permitting illegal financial assistance are severe. Not only are they struck off by the Department of Trade and Industry as directors, they are also open to criminal prosecution.

Another key element in making a demerger successful, second only to securing your financiers' backing, is gaining the support of your employees. A demerger will be the catalyst for change and as this affects all members of staff, it's very important to keep your communication channels open.

Of course confidentiality agreements may restrain you from releasing certain information, but keeping staff informed is important.

Needless to say the demerger must ultimately benefit your clients. Having had difficulties accessing funds for working capital in the past, following the demerger we invested over £4m to source new equipment for Blitz Charter.

The company's customers obtained the latest equipment and continued to benefit from a highly skilled and motivated workforce.

By bringing Blitz and Charter closer together we have also created value for our customers. As both organisations use equipment that have a degree of commonality, the ability to buy intelligently from suppliers benefits the business in terms of price and product longevity. The broadcast equipment used now by Charter will be the same used by Blitz in the AV industry in around two to three years' time. This increases return and creates economies of scale in the long run.

There is a natural crossover within clients and serviceability for projects.

Both Blitz and Charter, for example, were recently able to help one of the world's leading broadcasters transmit from an American base in the Kuwaiti desert to an international audience.

Charter supplied the broadcast equipment while Blitz supplied lighting, sound and projection expertise. The client only needed one supplier for its broadcast and AV requirements.

Breaking up is hard to do - but sometimes you just have to. Businesses, similar to relationships, can experience problems. It is paramount that managers don't lose focus of the business's intrinsic strengths. There is always a management way forward. Before you feel the urge to demerge, ask yourself one question - am I doing this for personal or business reasons?

The decision to demerge must only be based around business requirements and must benefit the organisation, its staff and clients. I would strongly recommend speaking to someone you respect in your professional life and seeking their opinion on whether you're playing emotional business games or whether its entirely business-led.

All too often managers are driven by personal needs and fail to think through the business objectives. You must also have a passion for the business and be dedicated to the organisation's success. It's this, coupled with integrity, that will get you the backing from your financiers, staff and from your clients which will ultimately decide the success or failure of your venture.

Michael Breen is CEO and former FD of Blitz Charter Group.