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.
[1] Firms may have several motives for divestitures: 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.
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.
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 execution includes five critical work streams: governance, tax, carve-out financial statements, deal-basis information, and operational separation.