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

The other commenters have already raised good points but none have mentioned the price of takeover: if a company is already profitable, the owners want something extra, because why else would they sell?
Well this “extra” is a higher cost.
The higher cost means that for it to be worth buying, you need to make the company even more profitable to compensate. This lowers the value of buying the company, and achieving it takes focus away from the main business.