Explain the divestment of company re-organisations, Financial Management

Divestment of company re-organisations

Adisinvestment or divestment is selling part of the business or subsidiary to another third party.

Reasons and features for divestments include:

· Liquidate assetsfor instance Littlewoods liquidation of 'Index 'catalogue stores in 2005 because of failure to compete effectively with Argos. Also liquidation of Woolworths in 2008. All assets sold, liabilities settled and company wound up. .

· Sell off products or brands as a going concernfor illustration there was speculation by media in 2004 that Nestle would sell its 'Perrier 'brand.

· Managementbuyout (MBO) for example when an existing internal management team buy a large part or all of the shares in the company. New Look was subject of a management buyout in 2004 by Tom Singh, the founder of the company who had floated it in 1998.

  • Management buy in (MBI)for example management team from outside the company raises the necessary finance and buys a large part or all of the shares in the company.

·  Demerger (sale off or unbundling)of divisions (business units) in a group for example Marriott Hotels was disposed of and demerged by Whitbread Group in 2005.Retailing giant Kingfisher,  which  owns  DIY  group  B&Q  demerged  Kesa  Electricals  in  2003  to concentrate  on  its  core  DIY  business, it created two  independent  businesses  with strong brands, they also demerged Woolworths in 2001.

· Rationalisationfor example cost  cutting  and  streamlining  business  activities  to  save  cost and improve efficiency, B&Q closure of 10 unprofitable stores in 2005.

 

Posted Date: 9/2/2013 6:32:35 AM | Location : United States







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