Definition: Divestment

Category: SNA

A divestment (de-merger) refers to the selling of the parts of the corporation due to various reasons:

a. A subsidiary or part of the corporation may no longer be performing well in comparison to its competitors;
b. A subsidiary or a part may be performing well but may not be well positioned within the industry to remain competitive and meet long-term objectives;
c. Strategic priorities of the corporation to remain competitive may change over time and lead to divestments;
d. Loss of managerial control or ineffective management; 
e. Too much diversification may create difficulties and thus lead the parent corporations to reduce the diversification of its activities;
f. The parent corporation may have financial difficulties and may need to raise cash;
g. Divestments may be realized as a defence against a hostile takeover (§ 21.23). http://ec.europa.eu/eurostat/ramon/statmanuals/files/SNA2008.pdf