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. Markets

    Relative Valuation Of Stocks Can Be A Trap

    This method of valuing a company can make it look like a bargain when it is not.
  2. Investing

    Using DCF In Biotech Valuation

    Valuing firms in this sector can seem like a black art, but there is a systematic way to pin a price on potential.
  3. Over the past 10 years, advertising strategies have evolved as a result of technological development as the internet has provided new channels for advertisers to reach a larger audience.
    Personal Finance

    How The Internet Web Ad Industry Works

    Over the past 10 years, advertising strategies have evolved as a result of technological development as the internet has provided new channels for advertisers to reach a larger audience.
  4. For two years, Tinder has been able to stay afloat without relying on any kind of revenue stream. Now, the free match-making mobile app is exploring a new money-making model in an effort to cash in on the international $2 billion-a-year online dating industry.
    Personal Finance

    Tinder to Start Swiping for Cash?

    For two years, Tinder has been able to stay afloat without relying on any kind of revenue stream. Now, the free match-making mobile app is exploring a new money-making model in an effort to cash ...
  5. Not every new company or product makes it, but many successful startups share the following characteristics.
    Entrepreneurship

    6 Characteristics Of Successful Apps

    Not every new company or product makes it, but many successful startups share the following characteristics.
  6. Investing Basics

    How Does Alibaba Make Money? A Simple Guide

    Alibaba broke IPO headlines--but making news and making money are two different things.
  7. When it comes to managing finances and tracking the markets on the go, there are a number of excellent apps that can be downloaded and installed onto your mobile device.
    Entrepreneurship

    Top Stock Market Apps For News Or Trading Or Both!

    When it comes to managing finances and tracking the markets on the go, there are a number of excellent apps that can be downloaded and installed onto your mobile device.
  8. A brief overview of the top apps that help forex traders with on time information, charts and more.
    Entrepreneurship

    Top Forex Trading Apps

    A brief overview of the top apps that help forex traders with on time information, charts and more.
  9. As technology has evolved, the landscape of the music industry has changed from radio broadcasts to mp3 and now streaming services.
    Entrepreneurship

    Will Pandora And Spotify Disrupt Music Royalties?

    As technology has evolved, the landscape of the music industry has changed from radio broadcasts to mp3 and now streaming services.
  10. Economics

    What are the major differences between a monopoly and an oligopoly?

    The major differences between a monopoly and an oligopoly include the number of firms in the market, type of barriers to entry and presence of close substitutes.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center