Divestiture refers to the process of a company selling, liquidating, or spinning off a business unit, subsidiary, or asset. Companies do divestments to simplify operations, generate capital, concentrate on main business activities, or follow laws.
1. Sell-Off: A sell-off is the sale of a division or asset by one corporation to another.
2. Spins-Off: A business unit spins off and distributes shares to current owners as it becomes an independent company.
3. Equity Carve-Out: Retaining control, a business sells some of a subsidiary through an IPO.
4. Management Buyout (MBO): The division is sold to its own management group.
5. Liquidation: Liquidation is the selling off of assets upon a unit closure of a firm.
Strategic Focus: Companies may sell non-core assets to concentrate on important areas of company.
Financial Needs: Getting money to lower debt or make investments in chances for expansion.
Regulatory Compliance: Governments might call for divestment to stop monopolies.
Underperformance: Selling less desirable units to strengthen financial situation.
Government Disinvestment: The Indian government has sold interests in public sector companies as BPCL and Air India.
Corporate Restructuring: Tata Group sold its telecom division to Bharti Airtel in order of corporate restructure.
Helps improve financial stability and strategic alignment.
For investors, if done right, can release shareholder value.
For staff members: may result in reorganization but may present chances for fresh development.