Through divestiture, a company can eliminate redundancies, improve operational efficiency, and reduce costs. Reasons why companies divest part of their business include bankruptcy, restructuring, to raise cash, or reduce debt.

What does it mean when a company divests?

Divestment involves a company selling off a portion of its assets, often to improve company value and obtain higher efficiency. ... Items that are divested may include a subsidiary, business department, real estate holding, equipment, and other property, or financial assets.

Why would a company sell a division?

Companies may also sell off business lines if they are under financial duress. For example, an automobile manufacturer that sees a significant and prolonged drop in competitiveness may sell off its financing division to pay for the development of a new line of vehicles.