Cendant is giving us a near perfect example of the diversification discount. The basic idea is that firms sell for less when they are made up of multiple lines of business. This has been the a edbate as to whether this is real or whether we are measuring the wrong thing. For instance we do not see the firms' apart from the start.
That said, it appears that most now acknowledge the existence of a discount. Cendant, after denying it for years, is now talking about splitting itself up to remove the discount.
Independent Online Edition > Business News : app4: "Cendant Corporation, the US group that acquired ebookers last year, is considering breaking itself up to unlock the hidden value in its travel and property arms.
The move would be the culmination of its attempt to focus on its core businesses"
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