A legal merger is a transaction by which two or more companies combine to form a single legal entity. … A demerger is a separation of the activities of a group: the original shareholders become the shareholders of the separated companies

Merger is an arrangement whereby the assets of two or more companies become vested in one company (which may or may not be one of the original two companies). It is a legal process by which two or more companies are joined together to form a new entity or one or more companies are absorbed by another company and as a consequence the amalgamating company loses its existence and its shareholders become the shareholders of the new or amalgamated company.

De-merger is an arrangement whereby some part /undertaking of one company is transferred to another company which operates completely separate from the original company. Shareholders of the original company are usually given an equivalent stake of ownership in the new company. De-merger is undertaken basically for two reasons. The first as an exercise in corporate restructuring and the second is to give effect to kind of family partitions in case of family-owned enterprises. A de-merger is also done to help each of the segments operate more smoothly, as they can now focus on a more specific task.