Brief Definition
Divestiture refers to the process of a company selling, liquidating, or otherwise disposing of a business unit, subsidiary, or asset.
Further Explanation
Divestiture refers to the process of a company selling, liquidating, or otherwise disposing of a business unit, subsidiary, or asset. This strategic decision is made to streamline operations, focus on core activities, raise capital, reduce debt, or comply with regulatory requirements. Divestitures can take various forms, including outright sales, spin-offs, or equity carve-outs.
Example:
A large conglomerate operates in multiple industries, including technology, healthcare, and retail. To focus more on its technology and healthcare divisions, the company decides to sell its retail division to another company for $500 million. This sale allows the conglomerate to concentrate resources and management efforts on its core areas of expertise while raising funds from the sale of the retail business.