What are two types of divestitures?
There are three basic types of divestitures: sell-offs, spin-offs and split-ups.
What does acquisitions and divestitures mean?
An acquisition of a company occurs when all or part of a company is purchased by another company. A divestiture can be any among a broad range of transactions that result in a portion of a company, such as a subsidiary, a division, or a line of business, being sold to another party.
What is a divestiture example?
A partial or full disposal can happen, depending on the reason why management opted to sell or liquidate its business’ resources. Examples of divestitures include selling intellectual property rights, corporate acquisitions and mergers, and court-ordered divestments.
Why do divestitures occur?
A divestiture is an important means of creating value for companies in the mergers, acquisitions, and the consolidation process. Reasons why companies divest part of their business include bankruptcy, restructuring, to raise cash, or reduce debt.
What is a divestiture in finance?
In finance, divestment or divestiture is defined as disposing of an asset through sale, exchange, or closure. A divestiture is an important means of creating value for companies in the mergers, acquisitions, and the consolidation process. For example, a merger might create redundant operations and businesses.
What is the legal definition of a divestiture?
Legal Definition of divestiture. 1 : the sale or transfer of title to a property (as an operating division) under court order (as in bankruptcy) 2 : the sale of an asset (as a business division) that is unprofitable, does not enhance a corporate restructuring, or is felt to be morally reprehensible.
What does it mean when a business unit is divested?
Updated May 12, 2019. A divestiture is the partial or full disposal of a business unit through sale, exchange, closure, or bankruptcy. A divestiture most commonly results from a management decision to cease operating a business unit because it is not part of a core competency.
What happens to a company after a divestiture?
What happens to a company after divesting depends on the type of divestiture. For example, a company that’s sold an entire business unit will need to oversee a transition period and transfer of assets to the buyer — after which time the company will generate income from that sale to redistribute elsewhere.
What does it mean to divest assets in bankruptcy?
Divestiture is also commonly referred to as “divestment,” and it can occur as part of a liquidation or sale, business exchange, closure, or bankruptcy proceeding. Financial motivations for divestment could stem from a desire to shed underperforming assets to improve a company’s value.