What is Asset Redeployment
Asset redeployment is the strategic relocation of assets from a less valued, or less profitable, use to a higher valued, or more profitable, use. Asset redeployment takes idle, or underutilized, capital and changes how it is employed in order to increase return on investment (ROI), or profitability. Utilizing a proper asset redeployment strategy would allow a firm to achieve better results for the same cost. As an example, Nike began as an athletic shoe manufacturer, but over the years it has outsourced shoe and apparel manufacturing and now is in the brand marketer.
BREAKING DOWN Asset Redeployment
When the asset is a good, such as equipment or machinery, redeployment can be a money-saving alternative to buying a brand new replacement good. An alternative to asset redeployment is an asset sale (called "asset disposal"). The proceeds from the sale increase the company's cash balance. Assets that a company needs to be redeployed or sold are called "surplus assets." A surplus is used to describe many excess assets including income, profits, capital and goods.
Example of Asset Redeployment
In 2014, GE sold its appliances business to Electrolux for $3.3 billion. The sale was part of the company's longer-term redeployment of capital from non-core assets like media, plastics and insurance to higher-growth, higher-margin businesses in Oil & Gas, Power, Aviation and Healthcare. These moves enabled GE to generate over 75% of earnings from its Industrial business by 2016.