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

If I’m a shareholder, my immediate question is “Why don’t you just send me that money so I can do the exact same thing the way I want to?” Companies should do things they have a competitive advantage in. There already exist investing companies that only do what you’re talking about, eg Berkshire Hathaway. But for a company with an actual purpose, eg Google or General Motors, the general thought is that you should do what you’re good at.

(Although you still might buy companies in seemingly unrelated fields to your core business because of synergy, eg GM buying AmeriCredit to form GM Financial.)