*Basic

Crown jewels refer to the most valuable units of a corporation as defined by profitability, asset value, and future prospects.[1] This could be the line of business that produces the most popular item that a company sells, or perhaps the department that holds all the intellectual property for a project that is thought to be of big value in the future once it is finished.[2]

**Intermediate

When there is a take over attempt by another company, often the goal of the acquiring company will be to obtain the information and operations that make up the crown jewels of the target.[3] This happens so frequently that there is a takeover defense strartegy named the “crown jewel defense.”[4] The crown jewels of a corporation are heavily guarded, only allowing certain people access to trade secrets and proprietary information, as these operations can be seen as highly distinctive from competitors' abilities and are often worth a lot of money.[5] A company can use the crown jewel defense by creating anti-takeover clauses that compel the sale of their crown jewels if a hostile takeover occurs.[6] The idea is that this should deter would-be acquirers from attempting to take the firm over, since the acquirer would not receive the desired operations or information if they proceeded with the takeover.[7] The sale of the crown jewels of a company is often a drastic attempt to ward off a hostile takeover or relieve the sever financial stress of a debt burden.[8] In either case, a company's best operating assets are sold, essentially changing the entire nature of the company and leaving it iwht a different set of growth prospects and shareholder support.[9] When a company is too overburdened with debt and is in danger of defaulting on payments, it may be forced to sell crown jewels to relieve the stress and avoid possible bankruptcy.[10]

***Advanced

The sale of crown jewels will leave the remnants of a company in less attractive or slower-growing markets.[11] There may be a decrease in the brand equity value of the company, and diminished sales and earnings growth prospects resulting from the loss of talanted management, product innovation, manufacturing efficiency, or geographic markets.[11] Shareholders who invested because of the crown jewels would typically flee if they are sold.

Sources

[1] Editors. Crown jewel defense. Wikipedia. en.wikipedia.org
[2] Editors (2023). Crown Jewel Defense – Hostile Takeover. Corporatefinanceinstitute.com
[3] Srivastav, A, K. Crown Jewels Defense – Defintiion, Examples, How it works? Wallstreetmojo.com
[4] Liberto, D (2021). Sale of Crown Jewels. Investopedia.com
[5] Editors. Crown Jewel Defense – Hostile Takeover. Wallstreetoasis.com
[6] Editors (2022). What is Crown Jewel Defense – all you need to know. Incorporated.zone
[7] Editors (2022). Crown Jewel Defense – Meaning, Examples, How it works. Efinancemanagement.com
[8] Editors. Crown Jewel Defense Summary and Forum. 12Manage.com
[9] Editors (2022). The five Defenses Against a Hostile Takeover. Fmi.online
[10] Editors (2021). Crown-jewel strategy. Ipleaders.in
[11] Editors (2021). Hostile takeover bids: A brief look at some defense strategies. Lawessential.com