'Divestiture is normally used to mobilize resources for core business or businesses of the company by realizing value of non-core business assets'. Explain the statement with reasons for Divestitures. Also state one exam

Divestiture means selling or disposal of assets of the company or any of its business undertakings/divisions, usually for cash (or for a combination of cash and debt) and not against equity shares to achieve a desired objective, such as greater liquidity or reduced debt burden. Divestiture is normally used to mobilize resources for core business or businesses of the company by realizing value of non-core business assets. For example: XYZ Ltd. is the parent of a food company, a car company, and a clothing company. If XYZ Ltd. wishes to go out of the car business, it may divest the business by selling it to another company, exchanging it for another asset, or closing down the car company. Reasons for Divestitures Huge divisional losses Continuous negative cash flows from a particular division Difficulty in integrating the business within the company Unable to meet the competition Better alternatives of investment Lack of technological upgradations due to non-affordability Lack of integration between the divisions Legal pressures E.g. Nestle is selling its US chocolate business, which includes brands such as BabyRuth, Butterfinger, and Crunch to Ferrero for US$2.8 billion. The deal is part of Nestle's strategy to sell underperforming brands and refocus on healthier products and fast-growing markets.