Diversification Acquisition

AAA

DEFINITION of 'Diversification Acquisition'

A corporate action in which a company purchases a controlling interest in another company in order to expand its product and service offerings. One way to determine if a takeover is a diversification acquisition is if the two companies have different Standard Industrial Classification (SIC) codes, meaning that they conduct different types of business activities.

INVESTOPEDIA EXPLAINS 'Diversification Acquisition'

A takeover between two companies that share the same SIC code is considered a "related" acquisition.


Conglomerates are often involved in diversified acquisitions either to minimize the potential risks of one business component/industry not performing well in the future or to maximize on the synergies and revenue streams of a diverse operations.



RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Horizontal Merger

    A merger occurring between companies in the same industry. Horizontal ...
  3. Vertical Merger

    A merger between two companies producing different goods or services ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Investment Income Ratio

    The ratio of an insurance company’s net investment income to ...
  6. Adjustable Feature

    Contract language that allows adjustments to be made to the premium ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Investing Basics

    Analyzing An Acquisition Announcement

    These deals can make or break investors' returns. Find out how to tell the difference.
  3. Bonds & Fixed Income

    Cashing In On Corporate Restructuring

    Companies use M&As and spinoffs to boost profits - learn how you can do the same.
  4. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  5. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  6. Bonds & Fixed Income

    8 Reasons M&A Deals Fall Through

    Mergers and acquisitions can mean big success. But what about all the deals that fall through?
  7. Insurance

    The Wonderful World Of Mergers

    While acquisitions can be hostile, these varied mergers are always friendly.
  8. Entrepreneurship

    Biggest Merger and Acquisition Disasters

    Find out which companies collapsed after merging.
  9. Trading Strategies

    Is using the Donchian channel more risky or more conservative than using Bollinger Bands®?

    Read about differences between Bollinger Bands and Donchian Channels, and learn why the latter are considered to be a riskier trading tool.
  10. Active Trading Fundamentals

    What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity risk.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center