Divestiture is the process of selling off a subsidiary business interest. It can be viewed as a reverse of a merger that enables a company to sell off its assets such as subsidiaries, product lines, product facilities, and divisions.
Divestiture can assume several different forms, such as a sell-off, spin-off, or an equity carve-out.
The reasons behind a divestiture process are:
- An acquisition that didn’t work out as well as expected
- Company strategic decision to concentrate on its core business and decide to divest anything that falls outside this core
- Removal of underperforming business unit
- Legal compulsion to break monopoly situation or anti-competitive practice
Divestiture needs to be done slowly and systematically over a long period of time, or in large lots over a short time period. Althoughdone mainly for strategic reasons, divestiture is, in essence, a financial transaction that requires financial expertise. If you are considering divestiture, talk with the advisers at TWC Finance who will aid you in understanding the procedure and guide you toward a successful outcome.