What Does Crown Jewel Mean?
A crown jewel refers to a company's most prized or valuable asset in terms of its profitability and future prospects. A company may have one or many crown jewels. The term is a reference to medieval times when kingdoms spanned multiple geographies with significant assets and also possessed valuable treasures. Over the life cycle of a company, assets may cease to be crown jewels if their profitability decreases or competitors enter the marketplace that challenge the asset's future prospects. Therefore, a company must always be weary of always improving and protecting its crown jewels.
Divestopedia Explains Crown Jewel
A company's crown jewel is its most valuable feature. For example, in some cases, a company's crown jewel may be its customer database. Whatever it is, these prized assets can make a firm an attractive potential target for a hostile takeover. However, the firm can use its crown jewels to ward off such attempts by selling them to a friendly third party. Alternatively, it may spin off its valuable assets into a separate entity. This makes acquisition more expensive and less attractive.
The transfer of crown jewels also leads to the dilution of holdings for the acquirer, making it less economical to the third party. However, there is a potential pitfall of employing crown jewels as a defense mechanism against hostile takeovers: distress sales of crown jewels may fetch a price far below their actual worth.