The segregation and sale of selected assets of an acquired company in an attempt to realize money in order to pay off part of the borrowed funds that were originally used for financing the deal (acquisition). The owners will resort to asset stripping when the value of the entire company is less than the combined value of its individual assets (i.e., when the market price of the company’s stock does not truly reflect the value of the whole company on a going concern basis).
Asset stripping generally suits companies with a negative goodwill. It may also be a basis for acquisition where an acquirer buys a target company (the acquired) for the purpose of selling its individual assets to realize their full value.
Compare: asset alienation.
