What's going on?

Old Mutual is a financial services giant that was founded in South Africa but is now one of the largest companies listed on the London Stock Exchange. On Friday, it announced it was going to break itself up.

What does this mean?

Old Mutual is currently a combination of four separate businesses. Why is it splitting up? For one, it will make it easier for investors to invest in the specific businesses rather than to have to invest in the group as a whole (which investors like). Secondly, splitting up presents potential regulatory benefits. For example, new regulations that are coming into force for insurance companies would only affect Old Mutual’s insurance business. By becoming totally separate entities, the businesses can be more streamlined and flexible � and, hopefully, ultimately more successful.

Why should I care?

For the stock: A company can be worth more when it�s split-up. That�s particularly true if the individual parts don�t have many �synergies� with each other (things like overlapping costs or sharing the same clients). The businesses can be burdened by each other (e.g. by regulation) rather than benefit from each other. Old Mutual�s shares jumped when the news was first rumoured last week.

The bigger picture: Africa appears to be a much less popular investment lately. It wasn�t long ago that Africa was being touted as the next frontier of growth. Sentiment toward Africa has clearly suffered from the broader emerging market decline. Old Mutual will sell down their stake in South African bank Nedbank. Only a few weeks ago, Barclays, the major British bank, announced they were exiting their presence in Africa.