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.
Shareholders' demands will continue to be a major divestment driver this year.
Business, divestment and outsourcing of business activities in Business
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.
Profit before tax, excluding exchange rate effects, divestments and items affecting comparability, rose 21%.
In the past few years many companies have looked to divestments to off-set cash and credit difficulties and to drive shareholder value as the sum of the parts are greater than the whole," says Paul Hammes, Ernst & Young LLP's Americas Leader for Divestiture Advisory Services.
To know that IOCs have used the proceeds of divestments to amass lucrative E&P assets to improve the sustainability of their operations.
Information about divestments of downstream assets and plans for growth in the upstream sector by major integrated oil companies also features in the report, which is built using data and information sourced from company reports, primary and secondary research and in-house analysis by GlobalData's team of industry experts.