What is the purpose of a divestiture?

A divestiture serves the primary purpose of helping a company focus on its core business operations. By selling off or disposing of non-core assets or business units, a company can streamline its operations, improve efficiency, and reduce costs. This process allows the organization to concentrate its resources, leadership, and capital on areas where it has competitive advantages or strong growth potential.

In contrast to the options related to increasing size, creating monopolies, or rapidly acquiring new investments, divestiture is fundamentally about simplifying the company’s structure and enhancing productivity. The strategic move often leads to better alignment with the company’s long-term goals and can result in improved financial performance by shedding underperforming segments.