What is divestiture?
This is when a company sells or gets rid of its assets, for example as part of a merger or acquisition. An organisation may also divest areas of its business that are not part of its core operation so it can focus on what it does best.
Where have you heard about divestiture?
You might have heard examples of companies selling part of their operations to streamline their business or reduce debt. In 2012, photography company Kodak announced it would divest its film, scanner and kiosk operations as part of its efforts to emerge from bankruptcy.
What you need to know about divestiture.
Divestiture may be carried out as a sell-off , spin-off or equity carve-out. One popular reason for divestiture is under performing business units. Selling these can cut operating losses and make organisations more efficient. Divestiture provides extra funds, enabling companies to pay off debt and use the cash to focus on other operations. Divestiture may also be forced. For example, following its merger with EE, news emerged that BT may be forced by Ofcom to divest its Openreach network. It eventually spun off Openreach into a legally separate company in 2017.
Find out more about divestiture.
Check out our guide to disinvestment to learn more about how companies sell off or liquidate their assets.