Definition: The Partial Sell-offs is the form of divestiture wherein the firm sells its business unit or a subsidiary to another because it deemed to be unfit with the company’s core business strategy.
Generally, the partial sell-offs decisions are taken to fulfill one of the following business motives:
- The most common motive for the sell-off is to raise capital and employ it in the core business unit of the firm.
- Most often, the sell-off decision is taken to curtail the losses being incurred in running the business unit, earning the sub-normal rate of return.
- The firm may divest that unit which may not fit with its strategic plan. Generally, those business units which are unrelated to the core business unit and requires a handsome amount of time and attention of the management.
- Many times, firm divest business units to restore its focus on the core business operations.
- A company takes a sell-off decision to earn the efficiency gains which means, the unit so divested worth more when operating as a stand-alone business unit or under any other ownership.
Thus, If the company finds its market value is being deteriorated due to the lack of synergy between its business units or subsidiary, the management may decide to get rid of that business unit and let it operate under the different ownership.