The timing of a divestiture is important. If the business to be sold is highly cyclical, the sale should be timed to coincide with the firm’s peak year earnings.
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In deciding to sell a business, a parent firm should compare the business’ after-tax value in sale with its pre-tax value to the parent as part of the parent.
Antitrust regulatory agencies may make their approval of a merger contingent on the willingness of the merger partners to divest certain businesses.
Empirical studies show that the desire by parent firms to increase strategic focus is an important motive for exiting businesses.
Divestitures, spin-offs, equity carve-outs, split-ups, and bust-ups are commonly used strategies to exit businesses.