divestiture
The disposal of a company's asset, subsidiary, or division through sale, spin-off, or closure — the opposite of an acquisition.
Example
“Under regulatory pressure, the merged company divested three business units to competitors.”
Memory Tip
DIVESTITURE = selling off or separating a business unit. The opposite of acquisition.
Why It Matters
Understanding divestiture helps you recognize when companies are restructuring, which can signal changes in business strategy, profitability, or risk management. If you own stock in a company that divests a major division, this event can significantly impact the stock price and your investment returns.
Common Misconception
Many people assume divestiture is always a sign of financial trouble or failure, but companies often divest profitable assets to focus on core business areas or raise cash for strategic investments. A divestiture can actually improve overall company performance by eliminating underperforming or misaligned business units.
In Practice
In 2020, Facebook sold its GIF search engine Giphy for $315 million, divesting an asset that did not align with its core social media business. This allowed Facebook to streamline operations and redirect resources toward developing its primary advertising and platform services rather than maintaining a separate tool.
Etymology
From Latin 'divestire' (to strip of clothing) — DIVESTING (stripping away) business units.
Common Misspellings
Track markets & get real-time stock data
Related Terms
More in markets
Other markets terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.