Economy and Business Votes

Archive for the ‘Corporate Divestitures’ Category

The term divestiture refers to divestment or simply a disposition of a business by a company. Divestiture is the opposite of investment. There are many reasons why Corporate Divestitures are carried out. First, a company can sell part of its business in order to focus on it core objectives. In this case the corporate decides to sell part of its business so that it can concentrate on it major part of the entity. Secondly, a corporate can carry out a divestiture in order to raise funds, which can be channeled out in the working capital to enhance some of its operations or service a debt.

Thirdly, Corporate Divestitures are carried through in a bid to get rid of some business divisions, which are underperforming. In this case, the corporate evaluates the advantages and disadvantages of retaining the business and makes the decision to sell it. An underperforming division could arise due to unsuitable strategies, which are being applied or due to poor financial support for the business.

Fourthly, Corporate Divestitures could occur as a result of court orders. In this case, a company may be ordered to sell part of its business in order to settle for instance, a debt. In other cases, it could be done from orders given by regulatory authorities. For example, it may be done in order to create competition. Last but not least, a company could sell part of its business in order to leverage its asset ‘break up’ value. At times the total sum of the individual assets liquidation surpasses the market value of the assets and in this case the investors decides to sell some of the assets.