1. The asset is clearly overvalued. Every time there's a hubristic buyer with money burning a hole in his pocket, there are owners of assets that stand to benefit from that manager's next transaction. The approach of any such manager is an ideal time to consider a divestiture.

When should a company divest?

A divestiture is an important means of creating value for companies in the mergers, acquisitions, and the consolidation process. For example, a merger might create redundant operations and businesses. Through divestiture, the company can improve operational efficiency and reduce costs.

What should be divested in business?

Divestment usually involves eliminating a portion of a business. Firms may elect to sell, close, or spin-off a strategic business unit, major operating division, or product line. This move often is the final decision to eliminate unrelated, unprofitable, or unmanageable operations.