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 ?
Moreover, if the students believe that divesting fossil fuel stocks would reduce carbon emissions, then they should also argue that Swarthmore should divest its shares in companies that consume fossil fuels as well.
Firstly, companies divesting assets of at least 5% 'percentage ratio' (1) must publicly announce via Bursa Malaysia (BM).
It helps avoid making the client feel rejected, and rewards the divesting firm for having attracted and served the client.
The owner, United Breweries Holdings, has said that it is considering either divesting to private investors or carrying out an initial public offering, to raise money to fund its expansion plans.
Acquisitions of multiline targets may provide unrecognized value creation potential due to the possibility of subsequently divesting certain of the acquiree's business lines in order to increase the overall concentration level of the acquirer.
Uncertainty about the true values of the divested assets, to the outside shareholders of the divesting firms and to the buyers, may be resolved over time.
However, given the difficulty and cost of divesting a major subsidiary, it is assumed that almost one in five firms divesting was not due to random chance but rather to a significant event (i.e., SFAS 94).
Finnish industrial logistics services provider Aspo Plc (OMX Helsinki:ASU1V) said on Monday (1 December) that its subsidiary Kauko-Telko Oy is divesting the Sourcing Services of its Kaukomarkkinat Unit to Nikolai Sourcing Ltd (former Kaukopartio Oy).
Verizon Communications Inc (NYSE:VZ), a provider of broadband and other services to wireline and wireless customers, announced on Sunday (4 December) that it is reviewing strategic alternatives for the divesting of the domestic operations of its wholly owned directories publishing business, Verizon Information Services (VIS).
The LP plan involves divesting 935,000 acres of timberlands along with its plywood, industrial panels, and lumber businesses and anticipates net proceeds in the US$ 600-700 million range.
Divesting the brand enables Moberg Pharma to further focus resources on its core businesses.
NORDIC BUSINESS REPORT-15 August 2008-Alma Media Corporation denies rumour of divesting some newspapers(C)1994-2008 M2 COMMUNICATIONS LTD http://www.m2.com