Divestiture

A divestiture is a direct sale of a portion of the parent company to an outside party in return for cash. Generally a firm sells struggling operations that operate at a loss or require upkeep capital. A parent company may also divest non-strategic or non-gaining businesses and invest the proceeds of the sale in potentially higher return opportunities or core business expansion. Divestitures could unlock the potential of an outperforming asset, whose performance is not properly valued by the market. The tax basis of the asset intended for divestiture will be considered before deciding on the appropriate type of divestiture.