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 ?
TI-CREF to divest from companies such as Veolia, Caterpillar, and Northrup
To reduce the potential for adverse competitive effects in this banking market, BB&T has committed to divest two branches in the market, with deposits totaling $90.
We call on all investment firms to divest from Lebanese bonds, and stop exposing their shareholders to such fraud and risk.
M2 EQUITYBITES-August 10, 2015-NetScientific Divests Non-Core Assets
The accounting firm said that banks could divest about EUR100bn in non-core loans this year.
On April 21st, 2009 we wrote the government of Norway calling for them to divest from Africa Israel because it is one company that built the settlement of Mattityahu East on Bil'in's land, and they responded that they were investigating.
Adam Schiff, D-Pasadena, to have the United States also divest itself of investments with firms doing business in the Sudan as well as adopt legislation formally recognizing the killings of 1.
TELECOMWORLDWIRE-17 December 2004-TDC A/S subsidiary divests services provider in Germany(C)1994-2004 M2 COMMUNICATIONS LTD http://www.
To mitigate the potential anticompetitive effects of the proposal in the Milledgeville banking market, BB&T has committed to divest one branch that currently controls approximately $19.
In fact, according to the EU competition authority, the most significant stipulation - that Mobil divest its share of a European refining and marketing joint venture with BP Amoco - appeared to be in line with the companies' plans to unload their lowest-yielding assets.
To mitigate the potential anticompetitive effects of the proposal in the eight banking markets in Vermont, Chittenden has committed to divest 18 branches that control a total of $497 million in deposits.