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

Divestiture

What it is:

A divestiture or divestment is the reduction of an asset or business through sale, liquidation, exchange, closure, or any other means for financial or ethical reasons. It is the opposite of investment.

How it works (Example):

Let's assume Company XYZ is the parent of a food company, a car company, and a clothing company. If for some reason Company XYZ wants out of the car business, it might divest the business by selling it to another company, exchanging it for another asset, or closing down the car company.

Why it Matters:

Optimists often look at divestitures as ways to streamline (i.e., "get back to basics"), reduce debt, and enhance shareholder value. Pessimists may view them as concessions that the divested assets were not performing well.

Related Terms View All
  • Goldbrick Shares
    For example, let's assume that Company XYZ is a tech company with growing revenues but...
  • Enrolled Agent (EA)
    To become an EA, a person has to pass a three-part comprehensive IRS test of individual...
  • Life-Plus-Five Option
    To understand how this works, let's assume you'd like to invest in an annuity that, after...
  • Fair Trade Investing
    For example, if John Doe wanted to adopt a fair trade investing strategy, he would only...
  • YOC
    To calculate yield on cost, divide the annual dividend by the per-share price you...