What is "Asset Stripping" meaning?

Asset stripping is a business strategy where a company or investor buys another company and then sells its valuable assets—such as property, equipment, or divisions—to generate immediate cash. This tactic is common in hostile takeovers or turnaround situations but is often criticized for harming long-term business health and employee job security.

Example

“The private equity firm was accused of asset stripping after selling off the target company’s factories and laying off staff.”

How is "Asset Stripping" used in business?

Asset stripping is typically used by investors or acquiring firms looking for short-term returns. While it can unlock hidden value, it’s controversial, especially when the remaining business becomes weaker or unsustainable. It's often seen in distressed acquisitions or leveraged buyouts.

Pro Tip

Be cautious of asset stripping when evaluating potential investors or buyers—it can signal short-term interest rather than sustainable growth plans.