Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Sale of Crown Jewels

What it is:

In the business world, a sale of crown jewels occurs when a company is frantically attempting to fend off a takeover.

How it works (Example):

For example, Company ABC makes a bid to buy Company XYZ. Company XYZ's founder, who is the chairman of the board, absolutely abhors Company ABC and refuses to sell the company to them. Company ABC goes directly to the Company XYZ shareholders and offers to buy their shares for a 10% premium.

Fearful that Company ABC may be successful in its efforts, Company XYZ intentionally hurts the value of the company by selling its key intellectual property (the "crown jewels") to the founder. Without these assets, the company is worth far less. Company XYZ also ceases advertising, breaks supplier agreements in order to slow down production and lays off 2,000 workers. With key aspects of the company gutted and the most valuable assets gone, Company ABC drops its bid for Company XYZ, which is now a hollow, valueless shell of its former self.

Why it Matters:

Selling the crown jewels is near suicide -- the board has to be willing to nearly kill the company in order to save it from acquisition. This is very risky, and in some cases the shareholders will oppose the effort. For this reason, selling the crown jewels is often a last resort.