# Divestment

Part of a series on :
Finance :
Markets
Assets
Asset (economics)
Bond
Asset growth
Capital asset
Commodity
Derivatives
Domains
Equity
Foreign exchange
Money
Over-the-counter
Private equity
Real estate
Spot
Stock
Participants
Angel investor
Bull (stock market speculator)
Financial planner
Investor
institutional
Retail
Speculator
Locations
Financial centres
Offshore financial centres
Conduit and sink OFCs :
Instruments
Bond
Cash
Collateralised debt obligation
Credit default swap
Time deposit (certificate of deposit)
Credit line
Deposit
Derivative
Futures contract
Indemnity
Insurance
Letter of credit
Loan
Mortgage
Option (callexoticput)
Performance bonds
Repurchase agreement
Stock
Security
Syndicated loan
Synthetic CDO :
Corporate
General
Accounting
Audit
Capital budgeting
Capital structure
Corporate finance
Credit rating agency
Enterprise risk management
Enterprise value
Risk management
Financial statements
Transactions
Leveraged buyout
Mergers and acquisitions
Structured finance
Venture capital
Taxation
Base erosion and profit shifting (BEPS)
Corporate tax haven
Tax inversion
Tax haven
Transfer pricing :
Personal
Credit / Debt
Employment contract
Financial planning
RetirementStudent loan :
Public
Government spending
Final consumption expenditure
OperationsRedistribution
Transfer payment
Government revenue
TaxationDeficit spending
Budget (balance)Debt
Non-tax revenue
Warrant of payment :
Banking
Central bank
Deposit account
Fractional-reserve
Full-reserve
Investment banking
Loan
Money supply
Lists of banks
Bank regulation
Banking license
Basel Accords
Bank for International Settlements
Financial Stability Board
Deposit insurance
Separation of investment and retail banking :
Regulation · Financial law
International Financial Reporting Standards
ISO 31000
Professional certification
Fund governance :
Economic history
Private equity and venture capital
Recession
Stock market bubble
Stock market crash
Accounting scandals :
Outline
Business and Economics portal
Money portal :
vte :
In finance and economics, divestment or divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm. A divestment is the opposite of an investment. Divestiture is an adaptive change and adjustment of a company's ownership and business portfolio made to confront with internal and external changes.

## Motives

Firms may have several motives for divestitures:
* a firm may divest (sell) businesses that are not part of its core operations so that it can focus on what it does best. For example, Eastman Kodak, Ford Motor Company, Future Group and many other firms have sold various businesses that were not closely related to their core businesses.
* to obtain funds. Divestitures generate funds for the firm because it is selling one of its businesses in exchange for cash. For example, CSX Corporation made divestitures to focus on its core railroad business and also to obtain funds so that it could pay off some of its existing debt.
* a firm's "break-up" value is sometimes believed to be greater than the value of the firm as a whole. In other words, the sum of a firm's individual asset liquidation values exceeds the market value of the firm's combined assets. This encourages firms to sell off what would be worth more when liquidated than when retained.
* divesting a part of a firm may enhance stability. Philips, for example, divested its chip division - NXP - because the chip market was so volatile and unpredictable that NXP was responsible for the majority of Philips's stock fluctuations while it represented only a very small part of Philips NV.
* divesting a part of a company may eliminate a division which is under-performing or even failing.
* regulatory authorities may demand divestiture, for example in order to create competition.
* pressure from shareholders for social reasons (sometimes also called disinvestment). Examples include disinvestment from South Africa in the former era of apartheid (now ended), disinvestment from Israel due to the occupation of the Palestinian territories, disinvestment from Russia due to the 2022 Russian invasion of Ukraine and calls for fossil fuel divestment in response to climate change.

### Divestment for financial goals

Often the term is used as a means to grow financially in which a company sells off a business unit in order to focus their resources on a market it judges to be more profitable, or promising. Sometimes, such an action can be a spin-off. In the United States, divestment of certain parts of a company can occur when required by the Federal Trade Commission before a merger with another firm is approved. A company can divest assets to wholly owned subsidiaries.
It is a process of selling an asset. The largest corporate divestiture in history was the 1984 U.S. Department of Justice-mandated breakup of the Bell System into AT&T and the seven Baby Bells.
Of the 1000 largest global companies, those that are actively involved in both acquiring and divesting create as much as 1.5 to 4.7 percentage points higher shareholder returns than those primarily focused on acquisitions.

### Divestment for social goals

Examples of divestment for social goals include:
* Disinvestment from Israel, a movement by critics of Israel (since 1920s)
* Disinvestment from South Africa in the former era of apartheid (1960s-1990s)
* Tobacco industry divestment, coordinated by the NGO Tobacco-Free Portfolios (since 2000s)
* Fossil fuel divestment in response to global warming, coordinated by the NGO 350.org (since 2010s)
* Factory farming divestment and big livestock divestment in response to environmental destruction, animal suffering, and human health concerns, coordinated by NGO Feedback Global.

## Method of divestment

Some firms are using technology to facilitate the process of divesting some divisions. They post the information about any division that they wish to sell on their website so that it is available to any firm that may be interested in buying the division. For example, Alcoa has established an online showroom of the divisions that are for sale. By communicating the information online, Alcoa has reduced its hotel, travel, and meeting expenses.
Firms use transitional service agreements to increase the strategic benefits of divestitures.
Divestment execution includes five critical work streams: governance, tax, carve-out financial statements, deal-basis information, and operational separation. Companies often create cross-disciplined teams composed of IT, HR, legal, tax, and other key business units, to implement a business separation.
With economic liberalization of the Indian economy, India's Ministry of Finance set up a separate Department of Disinvestments.