What is Divestiture

Divestiture: Divestiture is the sale or disposition of business by a company and might take place for different reasons. At times a divestiture outcomes simply from a company's desire to rid them of a poorly executing business. In other situations, a company will decide a business no longer fits its strategic objectives and is therefore an appropriate candidate for divestiture. More positively, a divestiture might outcome from a company's decision that it can maximize share-holder value from a booming business by letting it stand alone (though in this situation "spinoff" is more generally employed than divestiture). A divestiture might also outcome from a court order, like the divestiture of ATT of its local operating subsidiaries in the year 1980s. A corporate divestiture frequently needs the services of an investment bank to make sure the best price is attained for the asset. From an accounting point of view, a divestiture might be categorized as discontinued operations that require special accounting treatment.

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