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 ?
Also,, confirming his exit from Forte Oil, Otedola, in a message posted on his verified Instagram page, said he had divested from the business and would now concentrate on his power generation business.
The divested company will operate under the name Recover Nordic Korjausrakentaminen Oy and under its existing business ID after the closing of the acquisition.
The Supreme Court pronounced the judgement on a plea by Verma and Common Cause challenging the government's decision on the intervening night of October 23-24 to divest him of his charge as head of the investigating agency.
"Countries the world over must now urgently follow Ireland's lead and divest from fossil fuels."
'Forcing Khazanah to divest its profitable companies to selected individuals will open the doors for favoured or politically connected individuals to be enriched and herald a return to crony capitalism and piratisation,' Wee said in a statement.
The total divested amount by Noor Financial would amount to Rs 2.614 billion.
'Ang requirement to divest ay sa taas, sa Cabinet member.
White's promise to divest from Geovox if he wins was first reported by The Dallas Morning News.
The DOJ's approval was conditioned upon Iron Mountain's agreement to divest, to a buyer or buyers subject to the DOJ's approval, Recall's records and information management facility in Seattle and certain of Recall's records and information management facilities in Atlanta.
Analysts' chief concern is that WBA remains hard-pressed to find buyers for stores that would need to be divested for the FTC to clear the transaction.
Specifically, I am concerned that my university refuses to divest its estimated $4 million that are invested in fossil fuel companies.
The organizations within the divestment campaign are hoping this new strategy will encourage governments to divest public funds from fossil fuels and move them to clean energy.