Asset stripping

Asset stripping is buying a company, and then selling off businesses it owns separately.

This is worthwhile because many listed companies are worth more broken up. The key reasons for this are discussed in the entry on conglomerates.

The term asset stripping is often used perjoratively. It is disliked because it is often associated with restructuring and job-losses, and it is seen as a less worthy way of making money than building a business.

However, asset stripping does release value, improving the accuracy with which the constituent businesses are valued. This means that asset stripping does make financial markets more efficient.

Copyright Graeme Pietersz © 2005-2016