Divestment

In finance and economics, divestment or divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm. A divestment is the opposite of an investment.

Motives

Firms may have several motives for divestitures:

  1. a firm may divest (sell) businesses that are not part of its core operations so that it can focus on what it does best. For example, Eastman Kodak, Ford Motor Company, Future Group and many other firms have sold various businesses that were not closely related to their core businesses.
  2. to obtain funds. Divestitures generate funds for the firm because it is selling one of its businesses in exchange for cash. For example, CSX Corporation made divestitures to focus on its core railroad business and also to obtain funds so that it could pay off some of its existing debt.
  3. a firm's "break-up" value is sometimes believed to be greater than the value of the firm as a whole. In other words, the sum of a firm's individual asset liquidation values exceeds the market value of the firm's combined assets. This encourages firms to sell off what would be worth more when liquidated than when retained.
  4. divesting a part of a firm may enhance stability. Philips, for example, divested its chip division - NXP - because the chip market was so volatile and unpredictable that NXP was responsible for the majority of Philips's stock fluctuations while it represented only a very small part of Philips NV.
  5. divesting a part of a company may eliminate a division which is under-performing or even failing.
  6. regulatory authorities may demand divestiture, for example in order to create competition.
  7. pressure from shareholders for social reasons (sometimes also called disinvestment). Examples include disinvestment from South Africa in the former era of apartheid (now ended), and more recent calls for fossil fuel divestment in response to global warming.

Divestment for financial goals

Often the term is used as a means to grow financially in which a company sells off a business unit in order to focus their resources on a market it judges to be more profitable, or promising. Sometimes, such an action can be a spin-off. In the United States, divestment of certain parts of a company can occur when required by the Federal Trade Commission before a merger with another firm is approved. A company can divest assets to wholly owned subsidiaries.

It is a process of selling an asset. The largest and likely the most famous corporate divestiture in history was the 1984 U.S. Department of Justice-mandated breakup of the Bell System into AT&T and the seven Baby Bells.

Of the 1000 largest global companies, those that are actively involved in both acquiring and divesting create as much as 1.5 to 4.7 percentage points higher shareholder returns than those primarily focused on acquisitions.[1]

Divestment for social goals

Examples of divestment for social goals include:

Method of divestment

Some firms are using technology to facilitate the process of divesting some divisions. They post the information about any division that they wish to sell on their website so that it is available to any firm that may be interested in buying the division. For example, Alcoa has established an online showroom of the divisions that are for sale. By communicating the information online, Alcoa has reduced its hotel, travel, and meeting expenses.

Firms use transitional service agreements to increase the strategic benefits of divestitures.

Divestment execution includes five critical work streams: governance, tax, carve-out financial statements, deal-basis information, and operational separation.[2] Companies often create cross-disciplined teams composed of IT, HR, legal, tax, and other key business units, to implement a business separation.[3]

With economic liberalization of the Indian economy, India's Ministry of Finance set up a separate Department of Disinvestments.

See also

References

  1. ^ O’Connell, Sean; Park, Michael; Thomsen, Jannick. "Divestitures: How to Invest for Success". Transaction Advisors. ISSN 2329-9134.
  2. ^ Hammes, Paul. "Are You Considering Divesting Assets? If Not, You Should Be". Transaction Advisors. ISSN 2329-9134.
  3. ^ Markel, Carina; Smith, Lawson; Farkas, Jennifer. "A Billion Dollar Successful Separation". Transaction Advisors. ISSN 2329-9134.
Boycott

A boycott is an act of voluntary and intentional abstention from using, buying, or dealing with a person, organization, or country as an expression of protest, usually for moral, social, political, or environmental reasons. The purpose of a boycott is to inflict some economic loss on the target, or to indicate a moral outrage, to try to compel the target to alter an objectionable behavior.

Sometimes, a boycott can be a form of consumer activism, sometimes called moral purchasing. When a similar practice is legislated by a national government, it is known as a sanction.

Boycott, Divestment and Sanctions

The Boycott, Divestment and Sanctions movement (also known as BDS) is a global campaign promoting various forms of boycott against Israel until it meets what the campaign describes as Israel's "obligations under international law", defined as withdrawal from the occupied territories, removal of the separation barrier in the West Bank, full equality for Arab-Palestinian citizens of Israel, and "respecting, protecting, and promoting the rights of Palestinian refugees to return to their homes and properties". The campaign is organized and coordinated by the Palestinian BDS National Committee.Protests and conferences in support of the campaign have been held in a number of countries. Supporters of BDS compare the movement with the 20th century anti-apartheid movement and view their actions similar to the boycotts of South Africa during its apartheid era, comparing the situation in Israel to apartheid.Critics of BDS reject its charge that Israel is an apartheid state, asserting that in Israel (outside of the West Bank) "Jews and Arabs mix freely and increasingly live in the same neighborhoods...there is no imposed segregation." Critics have also argued that the BDS movement is antisemitic in the form its opposition to Zionism takes, drawing analogies to the Nazi boycott of Jewish businesses and accusing it of promoting the delegitimization of Israel.

Canadian Union of Public Employees

The Canadian Union of Public Employees (CUPE, French: Syndicat canadien de la fonction publique) is a Canadian trade union serving the public sector - although it has in recent years organized workplaces in the non-profit and para-public sector as well. CUPE is the largest union in Canada, representing some 650,000 workers in health care, education, municipalities, libraries, universities, social services, public utilities, transportation, emergency services and airlines. Over 60% of CUPE's members are women, and almost a third are part-time workers. CUPE is affiliated with the Canadian Labour Congress and is its greatest financial contributor.

Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010

The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (Pub.L. 111–195, 124 Stat. 1312, enacted July 1, 2010; CISADA) is a law passed by the U.S. Congress that applies further sanctions on the government of Iran.

CISADA extended U.S. economic sanctions placed on Iran under the Iran Sanctions Act of 1996 and punishes companies and individuals who aid Iran's petroleum sector. This increased pressure is part of the larger campaign over the Iranian nuclear program, and aims to target Iranian dependence on imports for its gasoline needs. The act was passed by the House (408–8) and Senate (99–0) on June 24, 2010 and signed into law by President Obama on July 1, 2010.

Constructive engagement

Constructive engagement was the name given to the policy of the Reagan administration towards the apartheid regime in South Africa in the early 1980s. It was promoted as an alternative to the economic sanctions and divestment from South Africa demanded by the UN General Assembly and the international anti-apartheid movement.

Demerger

A demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or more components. It is the converse of a merger or acquisition.

A demerger can take place through a spin-off by distributed or transferring the shares in a subsidiary holding the business to company shareholders carrying out the demerger. The demerger can also occur by transferring the relevant business to a new company or business to which then that company's shareholders are issued shares of. In contrast, divestment can also "undo" a merger or acquisition, but the assets are sold off rather than retained under a renamed corporate entity.

Demergers can be undertaken for various business and non-business reasons, such as government intervention, by way of anti-trust law, or through decartelization.

Direct Line Group

Direct Line Group plc is an insurance company based in the United Kingdom, formed in 2012 by the divestment of The Royal Bank of Scotland Group's (RBS) insurance division, through an initial public offering. The company owns a number of insurance subsidiaries, providing various insurance products, including Direct Line and Churchill, as well as the roadside assistance and vehicle recovery provider Green Flag.

The group is listed on the London Stock Exchange, and is a constituent of the FTSE 100 Index.

Disinvestment

Disinvestment refers to the use of a concerted economic boycott to pressure a government, industry, or company towards a change in policy, or in the case of governments, even regime change. The term was first used in the 1980s, most commonly in the United States, to refer to the use of a concerted economic boycott designed to pressure the government of South Africa into abolishing its policy of apartheid. The term has also been applied to actions targeting Iran, Sudan, Northern Ireland, Myanmar, and Israel.

Disinvestment from Israel

Disinvestment from Israel is a campaign conducted by religious and political entities which aims to use disinvestment to pressure the government of Israel to put "an end to the Israeli occupation of Palestinian territories captured during the 1967 military campaign." The disinvestment campaign is related to other economic and political boycotts of Israel.

A notable campaign was initiated in 2002 and endorsed by South Africa's Desmond Tutu. Tutu said that the campaign against Israel's occupation of the Palestinian territories and its continued settlement expansion should be modeled on the successful historical, but controversial, disinvestment campaign against South Africa's apartheid system.

Disinvestment from South Africa

Disinvestment (or divestment) from South Africa was first advocated in the 1960s, in protest of South Africa's system of apartheid, but was not implemented on a significant scale until the mid-1980s. The disinvestment campaign, after being realized in federal legislation enacted in 1986 by the United States, is credited by some as pressuring the South African Government to embark on negotiations ultimately leading to the dismantling of the Apartheid system.

Fossil fuel divestment

Fossil fuel divestment or fossil fuel divestment and investment in climate solutions is the removal of investment assets including stocks, bonds, and investment funds from companies involved in extracting fossil fuels, in an attempt to reduce climate change by tackling its ultimate causes.

Numerous groups advocate fossil fuel divestment, which in 2015 was reportedly the fastest growing divestment movement in history. Beginning on campuses in The United States in 2010 with students urging their administrations to turn investments in the fossil fuel industry into investments in clean energy and communities most impacted by climate change, the movement soon spread across the globe. By December 2018, a total of 1,000 institutions and over 58,000 individuals representing $8 trillion in assets worldwide had been divested from fossil fuels.

Genocide Intervention Network

The Genocide Intervention Network (or GI-NET) was a non-profit organization aiming to "empower individuals and communities with the tools to prevent and stop genocide". Founded in 2004, in 2005 the Genocide Intervention Fund changed its name to Genocide Intervention Network, and in 2011, it merged with the Save Darfur Coalition to form a new organization, United to End Genocide.

Jewish Voice for Peace

Jewish Voice for Peace (JVP) (קול יהודי לשלום Kol Yehudi la-Shalom) is a United States left-wing activist organization focused on the Israeli–Palestinian conflict.

In its mission statement, it describes itself as "a diverse and democratic community of activists inspired by Jewish tradition to work together for peace, social justice, and human rights [to] support the aspirations of Israelis and Palestinians for security and self-determination" and says it "seeks an end to the Israeli occupation of the West Bank, the Gaza Strip, and East Jerusalem". Its critics say it musters Jewish opposition to and works to undermine public support for Israel.

Lloyds Bank

Lloyds Bank plc is a British retail and commercial bank with branches across England and Wales. It has traditionally been considered one of the "Big Four" clearing banks. The bank was founded in Birmingham in 1765. It expanded during the nineteenth and twentieth centuries and took over a number of smaller banking companies. In 1995 it merged with the Trustee Savings Bank and traded as Lloyds TSB Bank plc between 1999 and 2013.

The bank is the principal subsidiary of Lloyds Banking Group, which was formed in January 2009 by the acquisition of HBOS by the then-Lloyds TSB Group. That year, following the UK bank rescue package, the British Government took a 43.4% stake in Lloyds Banking Group. As a condition imposed by the European Commission regarding state aid, the group later announced that it would create a new standalone retail banking business, made up of a number of Lloyds TSB branches and those of Cheltenham & Gloucester. The new business began operations on 9 September 2013 under the TSB brand. Lloyds TSB was subsequently renamed Lloyds Bank on 23 September 2013. On 17 March 2017, the British Government confirmed its remaining shares in Lloyds Banking Group had been sold.Lloyds Bank is the largest retail bank in Britain, and has an extensive network of branches and ATM in England and Wales (as well as an arrangement for its customers to be serviced by Bank of Scotland branches in Scotland, Halifax branches in Northern Ireland and vice versa) and offers 24-hour telephone and online banking services. As of 2012 it has 16 million personal customers and small business accounts.It has its operational Headquarters in London and other offices in Wales and Scotland. It also operates a number of office complex, brand headquarters and data centres in Yorkshire including Leeds, Sheffield and Halifax.

Meric Gertler

Meric Gertler, FBA is a Canadian academic and President of the University of Toronto, He was the Dean of the Faculty of Arts and Science at the same university until October 31, 2013. Gertler is an urban theorist and received his PhD from Harvard.

Ontario Northland Motor Coach Services

Ontario Northland Motor Coach Services is an intercity bus service operated by the Ontario Northland Transportation Commission, a Crown agency of the government of Ontario, Canada.

Coach service began in 1937 following the amendments to the Temiskaming and Northern Ontario Railway Act that allowed the then Temiskaming and Northern Ontario Railway to operate buses in Northern Ontario.

Ontario Northland Motor Coach Services operates passenger and parcel transportation service between Toronto (from the Toronto Coach Terminal and Yorkdale Bus Terminal) and locations in Central and Northern Ontario.

There are two scheduled routes running north–south between Toronto and Hearst; the Highway 11 corridor, through North Bay and Cochrane, and the Highway 400/69/144 corridor, through Parry Sound, Sudbury and Timmins. There are also routes running east–west between Sudbury and Ottawa and between White River and North Bay.All buses have complimentary WiFi for passengers which is available wherever a cellphone signal exists. There are scheduled rest stops for passengers every hour and a half or so.

The bus service was suspended when a drivers' strike began on September 29, 2007. The strike left the train as the only public transportation available for many communities; bus service did not resume until December 11, 2007.

Students for Justice in Palestine

Students for Justice in Palestine (SJP) is a pro-Palestinian college student activism organization in the United States, Canada and New Zealand that has campaigned for boycott and divestment against corporations that deal with Israel, and organized various Palestine Awareness Week events that accuse Israel of war crimes, ethnic cleansing and genocide.

As of 2010 SJP had more than 80 chapters at American universities. Some SJP chapters in the United States have adopted the name Palestine Solidarity Committee or Students for Palestinian Equal Rights. In Canada, some SJP chapters have adopted the name Students Against Israeli Apartheid (SAIA), or Solidarity for Palestinian Human Rights (SPHR).

Tucows

Tucows Inc. is a publicly traded Internet services and telecommunications company, headquartered in Toronto, Ontario, Canada, and incorporated in Pennsylvania, United States. It is the second-largest domain registrar worldwide and operates Hover, eNom, and OpenSRS, a platform for domain resellers. In 2012, Tucows launched Ting, a wireless service provider and fiber Internet provider, and continues to operate its namesake directory of shareware and freeware software downloads.

The company was formed in Flint, Michigan, United States, in 1993. The Tucows logo is two cow heads, a play on the homophone "two cows".

University of Auckland

The University of Auckland (Māori: Te Whare Wānanga o Tāmaki Makaurau) is the largest university in New Zealand, located in the country's largest city, Auckland. It is the highest-ranked university in the country, being ranked 85th worldwide in the 2018/19 QS World University Rankings. Established in 1883 as a constituent college of the University of New Zealand, the university is made up of eight faculties; these are spread over six campuses. It has more than 40,000 students, and more than 30,000 "equivalent full-time" students.

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