Asset Stripping

AAA

DEFINITION of 'Asset Stripping'

The process of buying an undervalued company with the intent to sell off its assets for a profit. The individual assets of the company, such as its equipment and property, may be more valuable than the company as a whole due to such factors as poor management or poor economic conditions.

INVESTOPEDIA EXPLAINS 'Asset Stripping'

For example, imagine that a company has three distinct businesses: trucking, golf clubs and clothing. If the value of the company is currently $100 million but another company believes that it can sell each of its three businesses to other companies for $50 million each, an asset stripping opportunity exists. The purchasing company will then purchase the three-business company for $100 million and sell each company off, potentially making $50 million.

RELATED TERMS
  1. Invisible Assets

    An item of value that is intangible and that cannot be seen, ...
  2. Asset

    1. A resource with economic value that an individual, corporation ...
  3. Asset Stripper

    An individual or company, which purchases a corporation with ...
  4. Asset Valuation

    A method of assessing the worth of a company, real property, ...
  5. Valuation

    The process of determining the current worth of an asset or company. ...
  6. Sum-Of-Parts Valuation

    Valuing a company by determining what its divisions would be ...
Related Articles
  1. Relative Valuation Of Stocks Can Be ...
    Markets

    Relative Valuation Of Stocks Can Be ...

  2. Using DCF In Biotech Valuation
    Investing

    Using DCF In Biotech Valuation

  3. How To Create A Business Succession ...
    Entrepreneurship

    How To Create A Business Succession ...

  4. Understanding S Corporations
    Investing Basics

    Understanding S Corporations

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center