Divestiture, which is also called divestment, refers to a company selling (divesting) parts of its business or specific assets because it believes that by following such an action the value of the business will be improved. As an example, a company may sell part of its operations which is not a core business so that it can focus its full attention on the core business and invest money obtained from the sale on expansion of the core business.

Sometimes selected operating units or departments are sold to its current management. Such transactions are usually financed via leveraged buyouts (LBOs).

Spin-off is another way to undertake divestment. This occurs when a certain operating unit becomes an independent business.

If a buyer cannot be found for part of the business or specific assets the business no longer would like to keep, then liquidation of the  business or assets is another option in which divestiture can be accomplished. Liquidation is, for obvious reasons, the least attractive option to accomplish divestiture.

It is often the case that an organization’s breakup value is greater than its current value. Breakup value, which is also called private market value (PMV), refers to the sum of values of each part of the business that could have been sold independently. A company with a high breakup value is more attractive acquisition target for acquiring company. This is because the acquirer can keep the valuable parts and sell the parts it does not need at a high price and use the money to pay down the price of the original acquisition.