Broadly speaking, there are four main types of divestitures. Firstly, the cash sale where a group sells a subsidiary and cash comes in. Secondly, a carve-out IPO where a group sells a minority stake in one of its subsidiaries. Thirdly, a spin-off where a new entity is created and shareholders get shares in both the group and in the newly spun-off subsidiary. And fourthly, a split-off shareholders exchange parent shares for subsidiary shares. So they aren't shareholders in the group anymore, they're now just shareholders in the split of subsidiary. So what are the reasons for these divestitures? Well, the first reason, which applies to all four of the different divestiture types is locked up value. This says that the sum of the parts are greater than the whole. So imagine a group which is worth 500. It might look at one of its subsidiaries and think if we sell that off, maybe we could sell it for 200, and the group that would be left over could be worth 400. Therefore, the sum of the parts would be 600 and greater than the original 500. That applies to all four of our divestiture types. Another reason for divestitures is an urgent need to raise cash by selling assets. Often the group has some strategic idea in mind. Maybe they want to break into a new country, maybe they want to change the direction of the business and getting cash in can help those ideas come to fruition. This is most true of the cash sale, but also true of a carve-out IPO. Here you'll have a traded market price for the subsidiary, but often for the parent as well. Another characteristic of divestitures is shareholders wanting to sell tax efficiently. The cash sale and the carve-out IPO usually bring in large amounts of cash, and because of that, cash companies end up making a gain on sale. Gains on sale often lead to taxes on those gains on sale. However, with a spin-off and a split-off, there's no cash proceeds. Instead, you are giving shareholders some shares. There's no cash proceeds in return from those shareholders. Usually no cash proceeds means no gain on sale means no tax. Instead, those shareholders can decide in their own time when they want to sell those shares, and they can do that tax efficiently according to their own circumstances.