Divestiture

Directly selling a section of the parent firm to a third party for money is a divestiture. Typically, a company sells underperforming businesses that are losing money or need money for maintenance. Additionally, a parent firm may sell non-strategic or losing ventures and reinvest the earnings in core business development or other possibilities with the potential for better returns. The potential of an asset that is outperforming but whose performance is not fairly valued by the market might be unlocked through divestitures. Before selecting the best kind, the tax basis of the asset that is planned for divestiture will be taken into account.