Disinvestment

Managers should always be looking for assets or operations that may be worth more outside of the company than within it.  In some cases, a drift or change in strategic direction can make old assets or operations less relevant, and therefore meriting less attention.  Value may be created by disposition of such assets or operations, especially to managers more experienced in wringing value from similar assets as their core focus.

Certain activities may have been a good idea at the time they were taken on, but if that time has gone, managers have an opportunity to create value by modifying or ending activities that destroy value. There is a natural reluctance to end long-lived activities. They probably once created a lot of value; they probably lead to the success of someone who is now a senior manager; ending them may result in painful lay-offs. These activities can be modified through restructuring, or can be altogether discontinued.

Short of a major restructuring, managers may simply find it necessary to write-off or write-down assets whose values are impaired.

© 2015 by Hodak Value Advisors.