divestment

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Related to divestments: Divestitures

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 ?
Deal teams must have the opportunity to prepare their businesses for the challenges they face on complicated divestments.
Shareholders demands will continue to be a major divestment driver this year.
in Portugal, the Celbi mill has been identified as a potential divestment candidate (the plant can produce around 305,000 metric tons/yr of short-fiber pulp)
The Anglican Church of Canada said at the time that it plans no action regarding divestment from Israel.
To understand that divestment of producing assets is a key reason for reduced output of oil and gas majors in Q3 2012.
ConocoPhillips, Phillips 66, Marathon Oil, Marathon Petroleum, IOCs restructuring, divestments, BP, Total, Royal Dutch Shell, Chevron, ExxonMobil
The divestments were made at, on average, 11 percent above the market values estimated by year-end 2004.
From 1998 - 2000, he led Strategic Planning at AstraZeneca's NAFTA headquarters in Wilmington, DE where he managed the development of the company's North American Strategic Plan, as well as divestments and licensing activities.
Actis Geoscience brings to paradigm a number of highly experienced oil and gas professionals who are experts in exploration, field development, production geology, production and reservoir engineering, equity studies, economic evaluations, commercial negotiations, and acquisitions and divestments.
We have strengthened our balance sheet considerably through asset divestments and we are now free to focus on improving our performance and enhancing our capabilities in core regions.
With the divestments already announced by the Group since the beginning of the year, this transaction will enable us to achieve around 880 million euros from divestitures in 2004 at an average multiple of 10 times EBITDA," said Rhodia CEO, Jean-Pierre Clamadieu.
Last year, Baring successfully executed 17 divestments (in 15 companies), at attractive multiples, resulting in total returns of EUR 181 million.