23.8 PURE DIVESTITURES, SPIN-OFFS AND EQUITY CARVE-OUTS
Firms do not always go in for the combination. Sometimes, especially parent companies, go for a reverse process of selling the assets of their subsidiary. A parent firm divests or sells off a part of its operation when it does not earn adequate rate of return or when it intends to narrow down the scope of its operation. In some cases, it sells off its assets when it needs cash for different purposes. This process is known as divestiture. Divestitures may take three forms. They are as follows:
- Pure divestitures or sell-offs;
- Spin-offs; and
- Equity carve-outs.
23.8.1 Pure Divestitures
Pure divestiture is a process in which a part of the operation of the subsidiary is sold out to a third party ...
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