The Causes And Economic Consequences Of Divestiture

Enterprises always face two choices in the operation process,that is,diversified operation or specialized operation.I have to say that most companies have always chosen to diversify.However,with the continuous development of the market economy and the increasingly perfect capital market,many companies have gradually shifted from diversified operations to specialized operations,which has also led to increasing cases of asset divestitures.According to statistics,from 2013 to 2017,the number of cases of divestitures of listed companies in China was as high as 6,942,and the total transaction value was 1,477.7 billion yuan.It can be seen that asset divestiture has become an important asset reorganization method for enterprises.However,China’s research on asset divestiture is inconclusive and most of the research focuses on divestiture drivers and divestiture performance,and rarely involves the problem of asset divestiture in actual operation.For example,when do you need to divest assets?Which method to choose for stripping?What risks need to be considered and how to avoid during the divestiture process?Therefore,we still need to conduct more in-depth research on asset divestiture,hoping that it can be used as a reference for those companies that need asset divestiture.This paper adopts the case study method,taking the asset divestiture implemented by TCL Group at the end of 2018 as the research object,and explores why the group should implement the asset divestment respectively.Why dose the group choose to divest assets at this time?When is the right time to choose?Why would the group choose to sell assets to implement divestiture?What is the impact of divestment on the group?What risks does the group face in implementing divestitures?How does the group respond to risks in the divestiture process?Through the analysis of the above issues,the TCL Group’s asset divestiture behavior is further studied and some practical suggestions are put forward.It is concluded that,first,Enterprises should recognize the importance of the contraction strategy,not blindly adhere to the strategic expansion,asset divestiture is also one of the means of enterprise development and growth.Secondly,enterprises can take the initiative to carry out asset divestiture in accordance with changes in the external environment,their own resource capabilities and business conditions.Rather than having to divest assets when some businesses are losing money overall.Thirdly,clarifying the objective of divestiture is conducive to the decision of the divestiture plan,such as how to choose the timing of divestiture,the way of divestiture and the counterparty.Finally,after the completion of the divestiture,the enterprise still needs to pay attention to the integration arrangement of the remaining assets,so as to ensure that the enterprise can not only complete the divestiture target but also operate more stably.