Diversified Company

AAA

DEFINITION of 'Diversified Company'

A company that has multiple, unrelated businesses. Unrelated businesses are those which (1) require unique management expertise, (2) have different end customers and (3) produce different products or provide different services. One of the benefits of being a diversified company is that it buffers a company from dramatic fluctuations in any one industry sector. However, this model is also less likely to enable stockholders to realize significant gains or losses because it is not singularly focused on one business.

INVESTOPEDIA EXPLAINS 'Diversified Company'

Companies may become diversified by entering into new businesses on its own, by merging with another company or by acquiring a company operating in another field or service sector. One of the challenges facing diversified companies is the need to maintain a strong strategic focus to produce solid financial returns for shareholders instead of diluting corporate value through ill-conceived acquisitions or expansions.

Some of the most well-known American diversified companies are GE, 3M, Sara Lee and Motorola. European diversified companies include Siemens and Bayer; Asian diversified companies include Hitachi, Toshiba, and Sanyo Electric.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  3. Merger

    The combining of two or more companies, generally by offering ...
  4. Parent Company

    A company that controls other companies by owning an influential ...
  5. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  6. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
Related Articles
  1. Evaluating The Board Of Directors
    Insurance

    Evaluating The Board Of Directors

  2. Measuring Company Efficiency
    Fundamental Analysis

    Measuring Company Efficiency

  3. Evaluating A Company's Capital Structure
    Bonds & Fixed Income

    Evaluating A Company's Capital Structure

  4. Cashing In On Corporate Restructuring
    Bonds & Fixed Income

    Cashing In On Corporate Restructuring

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center