Divestiture

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What is a Divestiture?

A Divestiture in corporate strategy is the sale, liquidation, or spin-off of a corporate division, or subsidiary. Often to focus the resources of the corporation on a market it judges to be more profitable or promising, or to increase the focus on its Core Competence. Focusing the resources of a firm on one or a few core businesses is usually better then taking diversification too far and spreading resources and overstretching the span of control of management. A divestment can also occur when required by a government agency such as the Federal Trade Commission or European Commission before a merger is approved. Finally, there are also examples of divestments for corporate responsibility reasons, such as the withdrawal of firms from South-Africa during the 1980s due to the Apartheid regime at the time.

In finance and investing, it is the disposal of an investment by sale, liquidation or other means.

A synonym for it is divestment. It is the opposite of an investment.

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Compare with: Spin-Off  |  Leveraged Buy-Out  |  Management Buy-Out  |  Exit Strategy  |  Synergy  |  Parenting Advantage  |  Parenting Styles  |  Growth Phases  |  Joint Venture  |  Special Purpose Vehicle

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