Reversing corporate diversification and the use of the proceeds from asset sales: The case of Thorn EMI

The restructuring of Thorn EMI transformed a diversified conglomerate trading at a diversification discount into a focused music company, while creating considerable value for shareholders. At the peak of its diversification, the conglomerate lacked sufficient funds for investment in its flagship music division. During its restructuring, this lack was remedied by raising cash through asset sales and reinvesting the proceeds in the company's core music activities. The Thorn EMI case contradicts the idea that managers destroy shareholder value when they reinvest the proceeds from asset sales for expansion through acquisitions.