divestiture

Divestiture is the partial or complete disposal of an asset, business unit, or subsidiary by a corporation. It covers selling, spinning off, or otherwise exiting from a non-core operation, often to improve strategic focus, raise capital, or reduce debt. Common forms include a straightforward sale of a unit; a spin-off in which the subsidiary's shares are distributed to the parent’s shareholders; a split-off in which shareholders exchange parent shares for subsidiary shares; and an equity carve-out in which the subsidiary issues shares to investors while the parent retains ownership. Asset sales for individual assets are also used, and management buyouts may occur in some cases.

Divestiture decisions arise from strategic reviews, financial objectives, or regulatory requirements. Key considerations include valuation, tax impact, effects on employees and customers, and compliance with securities and competition laws. The process typically involves planning, due diligence, negotiating terms, obtaining approvals from boards and regulators, and executing the transaction, followed by post-transaction integration or wind-down of the divested unit.

Divestitures are common across industries such as energy, manufacturing, technology, and finance. They can unlock capital, improve balance sheets, and help the remaining business focus on core strengths, though they may affect market presence and employment. Critics argue they can reduce scale; supporters contend they enhance efficiency and shareholder value when assets are misaligned with strategy.