Divestment

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See also Disinvestment.

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.

Motives[edit]

Firms may have several motives for divestitures:

Divestment for financial goals[edit]

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. (For 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.)

The largest, and likely most famous,[according to whom?] 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.

Method of divestment[edit]

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.

With Economic liberalization of the Indian economy, Ministry of Finance of India had set up a separate Department of Disinvestments.

Divestment campaigns[edit]

See also disinvestment

The term "Divestment Campaign" was first used in the 1980s, most commonly in the United States, to refer to the use of a concerted economic boycott designed to pressure the government of South Africa into abolishing its policy of apartheid. Since then, divestment campaigns have focused on countries and companies for their policies.

Major Companies targeted through divestment campaigns in the United States have included:

See also[edit]

References[edit]