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. Merger

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

    A company that controls other companies by owning an influential ...
  4. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  5. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  6. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
RELATED FAQS
  1. What are some tactics businesses can use to increase unlevered free cash flow?

    Unlevered free cash flow is defined as earnings before interest taxes, depreciation and amortization (EBITDA) less capital ... Read Full Answer >>
  2. What level of annual growth is common for companies in the Internet sector?

    The Internet services sector consists of a diverse group of companies that exhibit strong growth potential. Investors often ... Read Full Answer >>
  3. What are common growth rates that should be analyzed when considering the future ...

    Some of the most common growth rate metrics that investors and analysts consider in evaluating a company's future prospects ... Read Full Answer >>
  4. What metrics are often used to evaluate companies in the drugs sector?

    Some of the equity valuation metrics that analysts and investors most commonly use to evaluate companies in the pharmaceutical ... Read Full Answer >>
  5. How does an investor compute a Seasonally Adjusted Annual Rate of Sales for an automotive ...

    The seasonally adjusted annual rate of sales (SAAR) for an automotive company can be calculated by taking the unadjusted ... Read Full Answer >>
  6. How does Net Operating Profit After Tax give a clearer view of the operating efficiency ...

    Net operating profit after tax (NOPAT) gives a clearer view of the operating efficiency of a company. While NOPAT is a measure ... Read Full Answer >>
Related Articles
  1. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  2. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  3. Bonds & Fixed Income

    Evaluating A Company's Capital Structure

    Learn to use the composition of debt and equity to evaluate balance sheet strength.
  4. Bonds & Fixed Income

    Cashing In On Corporate Restructuring

    Companies use M&As and spinoffs to boost profits - learn how you can do the same.
  5. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  6. Investing Basics

    The Flow Of Company Information

    Learn how to gather all the pieces before you start to put together your puzzle.
  7. Fundamental Analysis

    The Financial Characteristics Of A Successful Company

    There are many factors that contribute to a profitable business. Find out what they are here.
  8. Active Trading Fundamentals

    Evaluating A Company's Management

    Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
  9. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  10. Options & Futures

    All About EVA

    Looking for a formula to determine whether a company is creating wealth? Time to learn all about economic value added.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!