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 ?
It said divestments may also depend on the strength of the market, as well as the availability, quality and credibility of buyers.
And divestment campaigners have had some high-profile success.
The development comes few days after the central government extended the submission deadline for the EOI bids under Air India's divestment process to May 31, 2018.
Pope Francis has already been voicing his concerns about climate change and the fossil fuel industry, and Vatican officials have even acknowledged the call for fossil fuel divestment. But so far they have not committed to divesting the Vatican from fossil fuels.
"It occurred to us that divestment as a demand could be a useful way for us to get a toehold on the issue in our little corner of the world," says William Lawrence, one of five founding members of the Mountain Justice divestment campaign.
According to the company, the divestment of Fiber Choice enables it to further focus resources on its core businesses.
The joint divestment announcement, coordinated by the Global Catholic Climate Movement, came on the St.
"This wave of support for the policy of divestment seems to us to roll over the hopes, aspirations, future and even the faith of many Anglicans without consideration for any impact on their lives," said Leer, referring to the thousands of jobs that have been lost since the 2014 downturn in the oil industry.
The conditional clearance by the CCI for an earlier divestment proposal was received in April 2015; including the divestment of Jojobera and Sonadih plants in Eastern India with a cement capacity of 5.1m tons.
TELECOMWORLDWIRE-December 17, 2015-NQ Mobile terminates proposed divestment of Beijing Tianya
Fossil fuel divestment campaigns scored some big wins in California in September.
Despite this step change, the study shows that there is still significant conflict within businesses around how to manage divestment activity.