What is asset stripping?

Asset stripping refers to the process in which assets of an acquired company are sold, or the company itself is split up and the different parts are sold separately. This often happens after a takeover, where the proceeds are used to repay the loans taken out for the takeover (debt reduction).

During asset stripping, the company is valued to determine whether selling individual parts yields more than selling the company as a whole. The sale of the parts usually happens in phases: some parts are sold quickly after the acquisition, while other parts are sold at a later time.