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 ?
41 per cent of businesses are focussed on divestment and acquisition.
Successful divestments achieve optimal value as a result of advanced planning that includes regular portfolio reviews, sophisticated analytical tools and a thoughtful divestment roadmap.
Along with training and advocacy groups, divestment advocates now have a new source of legal support.
Stanford Out of Occupied Palestine came together in pursuit of selective divestment as a response to the call from Palestinian civil society to exert economic pressure to end to the violations of their basic human rights.
For example, Harvard University's president, Drew Gilpin Faust, sharply rejected divestment in 2013.
The divestment strategy is borrowed from the anti-apartheid campaign in the 1980s, which sought to isolate the white-ruled government of South Africa by punishing companies that did business there.
The divestment complies with Central Bank's 'Regulation 3' on the Scope of Banking Activities and Ancillary Matters, which requests banks to operate as Commercial, Merchant or Specialised banks.
MPP Vic Fedeli (Nipissing--PC) said newly divulged Ministry of Finance documents, which were released to the committee investigating the gas plant cancellation, reveal that divestment will not bring the promised savings.
There are now student-led divestment campaigns on more than 300 campuses.
The group's growth in net sales during the first half of 2012, excluding exchange rate effects and divestments, was 4%.
The divestment, APICORP's first ever, was approved by APICORP's Board of Directors at its fourth and final Board of Directors meeting for 2010 held in Cairo on 26 December.
The spokesman said: "The subject of the divestment order is a consortium consisting of Dansk Landbrugs Grovvareselskab amba and Danish Agro amba.