divestment

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Divestiture

The removal of assets from a person or firm's balance sheet through sale, exchange, closure, bankruptcy, or some other means. Divestiture may occur when a person or company has acquired more than he/she/it can properly administer. This sort of divestiture may occur slowly; for example, a corporation may slowly sell subsidiaries to concentrate exclusively on its core competence. On the other hand, divestiture may occur because a person or company has become cash poor and needs to build liquidity very quickly.

divestment

the closure or sale by a firm of one or more of its operating units (for example a production plant) or a whole business division. In the former case, divestment usually occurs in order to rationalize production and/or to concentrate the firm's output in a more modern plant. In contrast, the divestment of a whole business division represents a more fundamental strategic decision on the part of the firm. Divestment in this case may reflect a number of considerations, including a desire to pull out of an unprofitable, loss-making activity deemed to be incapable of TURNROUND; the wish to shed peripheral businesses in order to release cash and managerial resources which, in opportunity cost terms, could be more effectively, redeployed in the firm's other activities; a major rethink of a firm's strategic position involving a retrenchment back to ‘core’ businesses; and finally, a wish to avoid the opposition of the COMPETITION POLICY authorities, particularly in cases of MERGERS and TAKEOVER.

Divestment by one firm often presents an opportunity for some other firm to diversify (see DIVERSIFICATION), in turn, into new business areas, or for former competitors to increase their market shares. See ENDGAME STRATEGY, BUSINESS STRATEGY, BOSTON MATRIX, DEMERGER, MANAGEMENT BUYOUT, JOINT VENTURE, PRODUCT MARKET MATRIX, PRODUCT RATIONALIZATION, CORE BUSINESS.

divestment

the closure or sale by a firm of one or more of its operating units (e.g, a production plant) or a whole business division. In the former case, divestment usually occurs in order to rationalize production and/or to concentrate the firm's output in a more modern plant. In contrast, the divestment of a whole business division represents a more fundamental strategic decision on the part of the firm. Divestment in this case may reflect a number of considerations, including a desire to pull out of an unprofitable, loss-making activity; the divestment of ‘peripheral'businesses in order to release cash and managerial resources that, in opportunity cost terms, could be more effectively redeployed in the firm's other activities; divestment may reflect a major rethink of a firm's strategic positioning, involving a retrenchment back to ‘core’ businesses. Finally, divestment may be required so as to avoid the opposition of the COMPETITION POLICY authorities, particularly in cases of merger and takeover.

Divestment by one firm, in turn, often presents an opportunity for some other firm to diversify (see DIVERSIFICATION) into new business areas or for former competitors to increase their market shares. See RATIONALIZATION, BOSTON MATRIX, DEMERGER, MANAGEMENT BUYOUT.

References in periodicals archive ?
This is true precisely because a divesting firm truly is selling off a small part of its business.
And because the divesting firm may have tried unsuccessfully to price the client into leaving the firm, it allows a small firm to achieve pricing it might otherwise not be able to achieve.
Failure to reveal the transaction price paid for divested assets will lead to less favorable reactions from shareholders of buying firms and divesting firms than if the price is disclosed.
To be included, buying firms and divesting firms must be listed on the NYSE/AMEX daily stock return files of the Center for Research in Security Prices (CRSP) over the estimation period and test period and be actively traded during the study period.
The only things the proponents of divesting truly hope to change is in the wage and benefit packages of the employees.
The initiatives include divesting or consolidating 14 hospitals with aggregate annual revenues of approximately $933 million that no longer fit Tenet's core operating strategy and reducing non-patient care expenses by at least $100 million annually as part of its program to improve operating efficiency and profit margins.
In testimony at a previous investment committee meeting earlier this year, Kenslea had asked CalPERS to consider divesting from GSK in light of 8,500 AIDS deaths daily among those who cannot afford life-saving medications.
NYSE:VAS), a leading healthcare technology company, today announced plans to exit the patient monitoring business by divesting its wholly-owned subsidiary, Medical Data Electronics (MDE).
As we previously outlined, we are implementing a new business strategy for CMGI that includes investing in specific core areas, as well as restructuring or divesting of any underperforming and non-strategic assets.
Cambridge Electric is divesting its electric generating assets consistent with the provisions of the Massachusetts Electric Restructuring Act of 1997.
The decision to pursue divesting its RMI and FSM operations is part of the company's previously announced strategic plan designed to maximize shareholder value by strengthening its core operations and divesting non-strategic holdings.
Dixey added, "The sale of ESA is consistent with our stated strategy of divesting non-core assets as we focus the Company's portfolio of activities to build shareholder value.