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 ?
And because the divesting firm may have tried unsuccessfully to price the client into leaving the firm, it allows a small firm to achieve pricing it might otherwise not be able to achieve.
If divestiture is handled properly, the risks to the acquiring and divesting firms are small.
The first is that the divesting firm built a relationship in advance with a CPA firm it trusts and that trusts it.
The acquiring firm's culture/CPA's personality is consistent with the client's experiences at the divesting firm.
To be included, buying firms and divesting firms must be listed on the NYSE/AMEX daily stock return files of the Center for Research in Security Prices (CRSP) over the estimation period and test period and be actively traded during the study period.
The sample is dichotomized on the basis of prior downgrades of the divesting firm's credit rating and transaction price disclosure at announcement.
18% of the seller's equity value if the divesting firm had been downgraded and 31.
The two-day announcement CAR for this sample of divesting firms is 0.
6%); whereas, the divesting firms' mean DE ratios increased by 1.
The only things the proponents of divesting truly hope to change is in the wage and benefit packages of the employees.
Instead of the disruptive agenda of divesting, the discussion should focus on how to infuse the overdue investment in new reliable and cost-effective buses, how to create a stable leadership, and how to empower the rank and file so that together we all make a difference in the quality of service.
NYSE:VAS), a leading healthcare technology company, today announced plans to exit the patient monitoring business by divesting its wholly-owned subsidiary, Medical Data Electronics (MDE).