Diversification Acquisition

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.

BREAKING DOWN '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. Standard Industrial Classification ...

    A standard series of four-digit codes created by the U.S. government ...
  2. Horizontal Acquisition

    The acquisition of one company by another in the same industry. ...
  3. Asset Acquisition Strategy

    The purchase of a company by buying its assets instead of its ...
  4. Busted Takeover

    A highly leveraged corporate buyout that is contingent upon the ...
  5. Dilutive Acquisition

    A takeover transaction that will decrease the acquirer's earnings ...
  6. Acquisition

    A corporate action in which a company buys most, if not all, ...
Related Articles
  1. Markets

    SIC Vs. NAIC -An Introduction To Industry Classification Codes

    Standard Industrial Classification (SIC) Codes and the more recent NAICS codes are crucial to classifying data to measure industrial growth.
  2. Trading

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  3. Markets

    What's an Acquisition?

    In corporate terms, an acquisition is the purchase of a company or the division of a company. Some acquisitions are paid in cash, while others are paid with a combination of cash and the acquiring ...
  4. Investing

    Warding Off Hostile Takeovers

    The purpose of this article is to provide a general overview of hostile corporate takeovers, while highlighting a general course of action against such activity. This article provides basic information ...
  5. Investing

    What is a Takeover?

    A takeover happens when one company makes a bid to acquire a target company.
  6. Investing

    Reverse Takeover

    Learn more about this type of takeover and how companies use it to avoid IPOs.
  7. Markets

    Trademarks Of A Takeover Target

    These tips can lead you to little companies with big prospects.
  8. Investing

    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.
  9. Investing

    What Merger And Acquisition Firms Do

    The merger or acquisition process can be intimidating. This is why merger and acquisition firms step in to facilitate the process.
  10. Investing

    What Investors Can Learn From M&A Payment Methods

    How a company pays in a merger or acquisition can reveal a lot about the buyer and seller. We tell you what to look for.
RELATED FAQS
  1. What is the difference between an acquisition and a takeover?

    There is no tangible difference between an acquisition and a takeover; both words can be used interchangeably - the only ... Read Answer >>
  2. What is the difference between a merger and an acquisition?

    Read about the legal and practical differences between a corporate merger and corporate acquisition, two terms often used ... Read Answer >>
  3. How do I evaluate whether a company is a good acquisition candidate?

    Evaluate whether a company is a good acquisition candidate by analyzing its price, debt load, litigation and financial statements. Read Answer >>
  4. What is the difference between a merger and a takeover?

    In a general sense, mergers and takeovers (or acquisitions) are very similar corporate actions - they combine two previously ... Read Answer >>
  5. Under what circumstances might a company decide to do a hostile takeover?

    Learn about why companies use a hostile takeover to gain control of another company, and understand the different methods ... Read Answer >>
  6. What happens to the stock prices of two companies involved in an acquisition?

    When a firm acquires another entity, there usually is a predictable short-term effect on the stock price of both companies. ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center