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Asset Stripping

Asset stripping is a financial strategy where a company or individual buys a company with the intention of selling off its assets separately to make a profit. This often involves purchasing a company that is undervalued or in financial distress, breaking it up, and selling its valuable assets like real estate, machinery, or intellectual property. The proceeds from the sale of these assets are used to repay debt or provide a return on investment.

Example

A private equity firm might purchase a struggling manufacturing company, sell off its real estate and equipment, and then close the company, profiting from the sale of the assets.

Key points

• A strategy where a buyer purchases a company to sell off its assets for profit.

• Often involves companies that are undervalued or in financial distress.

• Controversial due to its potential impact on jobs and communities.

Quick Answers to Curious Questions

It is controversial because it can lead to the dismantling of the company, resulting in job losses and negative effects on the local community.

Assets such as real estate, machinery, equipment, and intellectual property are often targeted in asset stripping.

By selling off valuable assets separately, the buyer can often recover more money than the initial purchase price of the company, leading to a profit.