![]() ![]() Leveraging this divestiture strategy allows the telecom firm to successfully execute the divestment,monetize non-functional assets and improve capital. Conveying the purpose of the divestiture and its estimated benefits to internal and external stakeholders.Preparing a de-integration plan for the divestment.Examining the future of the firm in terms of the proposed divestiture.Looking for prospective buyers in the market.Analyzing the relevance of the division to discern its value.Reviewing the performance of the division based on the identified core processes.After a series of brainstorming sessions, they come up with a divestment strategy that involves: Divestment Strategy ExampleĪ telecom company is seeking to combat the economic disruption brought on by the COVID-19 pandemic by selling off its logistics division. It helps organizations readjust theirbusiness models, remain relevant in a competitive landscape and consistently increase profits in the long run. Organizations that divest 20% of their businesses experience better growth in the market compared to organizations that divest only 5%.Ī divestiture strategy, when adopted during a recovery period, can generate greater shareholder returns. Evidence shows an organization’s stock prices rise faster after a divestiture. Attracting InvestorsĪ divestment strategy helps attract investors, highlighting an organization’s redefined areas of focus and its future growth prospects. Some organizations may also opt to reinvest the released funds in shares or use them to acquire new assets better aligned with their core competencies. When implemented right, a divestment strategy allows an organization to free up funds and reallocate these toward the most profitable areas of business. Organizations are also able to effectively review their portfolios through a divestment strategy. It offers transparency and valuable insights into business operations, helping organizations identify which of their assets are ready for divestment and are most likely to deliver maximum value from the divestiture. Increasing TransparencyĪ divestiture strategy can benefit organizations that have a diverse range of assets spread across multiple locations. A divestment strategy can be a saving grace in such situations, allowing the organization to identify its least-profitable assets and sell them off to reduce costs, improve cash flow and pay off debts. Lack of profitability can cause an organization to incur significant debts and push it toward bankruptcy in the worst-case scenario. Here we look at a few ways in which a divestment strategy is important: 1. Importance Of A Divestment StrategyĪ divestiture strategy is crucial to making correct divestment decisions. A divestment strategy is the way to go when a particular business line doesn’t perform to expectations and becomes a liability instead of an asset.Organizations may also turn to a divestiture strategy to prevent insolvency, reduce debts and maintain a low debt-to-equity ratio. ![]() Therefore, they opt for a divestment strategy to not only remain focused on their major areas of operation but also drive revenue in the process. Sometimes, it also includes separating a struggling division from the parent organization and establishing it as an independent entity-also known as a spin-off.Īs organizations expand, they sometimes find it difficult to pay equal attention to all of their business arms. Divestment involves sale of an organization’s business assets, divisions or subsidiaries in an effort to streamline operations and improve financial health. ![]() Here we examine its ins and outs.Ī divestment strategy, also known as a divestiture strategy, is a retrenchment strategy deployed by organizations to scale down the range of their business activities. For decades, organizations have divested non-performing assets using a well-thought-out divestment strategy to reverse losses or explore alternative areas of investment. How often have we heard that to progress in life, we need to let go of the past-let go of the things that no longer serve us? In the world of business, the concept of letting go takes the form of divestment. ![]()
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