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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.
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