What is "asset stripping"

Asset stripping is a method in which a company or an individual, known as a corporate raider, attains control of another company, and then auctions off the acquired company's assets. The sold assets are often used to repay the debt of the corporate raider, which may have been increased due to the acquisition. The process of asset stripping is utilised by corporate raiders in order to repay the debts they may have, whilst increasing their net worth. A company that may become susceptible to asset stripping is a company whose individual assets are worth more than its collective net worth.

The term is generally used in a pejorative sense as such activity is not considered productive to the economy. Asset stripping is considered to be a problem in economies such as Russia or China that are making a transition to the market. In these situations, managers of a state-owned company have been known to sell the assets which they control, leaving behind nothing but debts to the state.