Can large companies simply buy large companies from smaller industries in order to a) get passive income and b) have alternate industries to fall back on?

Question

EDIT: And they just leave those sub companies as they are (provided they are already making profit), so the only thing that changes it that the excess profit could go to the whole company; they leave it to function the same

ALSO EDIT: Not necessarily passive income (mb) but just to expand the larger companies reach- theoretically could one country have non-negligible stakes in every major industry through this method?

Thank you all this was actually very helpful 😀

In: Economics

Answer 1

A company that owns a bunch of businesses on different industries is  called a conglomerate. There is some benefit of diversification when one business does well while another does poorly. However, they ofter trade at a discount to the businesses separately. Think of it this way, if a company owns an energy business, a software business and a retail business, there may be investors who would love to invest any one of those businesses but doesn’t want to infest in the others.