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This is one of two methods a corporate raider can use to strip assets illegally. For this method to work, the corporate raider and the targeted firm must have the same director. Assets of the targeted firm are transferred to the corporate raider to ensure they remain safe from debt collectors. This
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decided to withdraw the rights for Phones 4u to sell their products. Due to the already poor financial situation of Phones 4u, the company had no alternative but to sell its individual assets and close down. The net worth of Phones 4u's assets, estimated to exceed £1.4 billion, provided BC Partners
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Asset stripping is a highly controversial topic within the financial world. The benefits of asset stripping generally go to the corporate raiders, who can slash the debts they may have whilst improving their net worth. However, since asset stripping often results in thousands of employees losing
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in 1985. Icahn stripped TWA of its assets, selling them individually to repay the debt assimilated during the takeover. This particular corporate raid formed the idea of selling a company's assets in order to repay debt, and eventually increase the raider's net worth.
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their jobs without much consideration of the consequences to the affected community, the concept can be unpopular in the public sphere. One particular example of where asset stripping cost a significant number of workers their jobs was in the
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and had deep financial struggles. However, this did not prevent BC Partners from taking a £223 million dividend in order to pay off some of its own debts. Under the ownership of BC Partners, Phones 4u had very little
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The proceeds of the sale of assets may be used to lower the company's net debt. Alternatively, they may be used to pay a dividend to equityholders, leaving the company with lower
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The process of asset stripping is not an illegal practice. If a corporate raider sells the target company's assets individually and pays off its debts the
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have no room for investigation. However, some firms perform the process illegally and if found guilty may incur a substantial fine or even prison.
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case. After the takeover, 433 people lost their jobs when assets were sold off and the company was stripped.
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another company and then auctions off the acquired company's assets. The term is generally used in a
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with Gulf Oil for $ 13.2 billion, which at that time was the biggest merger between two companies.
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This method acts on completely fraudulent terms, and results in a higher punishment from the
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for a fee in the region of £700 million. At this point in time Phones 4u had already entered
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with the credit to pay off some of its debts and significantly improve its net worth.
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Asset stripping by private equity firms in Europe is now regulated pursuant to the
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One of the biggest corporate raids that failed to materialize was the takeover of
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Asset stripping has been considered to be a problem in economies such the
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to improve returns for equity investors, often a financial investor, a "
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of a building would lead to an increased rental bill for the company.
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sense as such activity is not considered helpful to the company.
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to expand and claim back the contract of EE. In
September 2014
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deal primarily with the United
Kingdom and do not represent a
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332:; a customer of Gulf Oil. Therefore, Chevron stepped-in and
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90:. Unsourced material may be challenged and removed.
16:Selling assets for the sake of equity investors
386:Alternative Investment Fund Managers Directive
586:"Asset-stripping by bosses finished Phones4U"
175:The examples and perspective in this article
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53:Learn how and when to remove these messages
300:Early innovators of asset stripping were
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213:Learn how and when to remove this message
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613:Partington, Adam (10 October 2014).
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565:"Chevron: The Big Oil Boys"
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548:Stevens, Mark (May 2014).
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379:financial regulators
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479:Pettinger, Tejvan.
648:on 30 October 2014
563:Mattera, Phillip.
271:sale-and-leaseback
695:Corporate finance
668:"Asset Stripping"
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