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

Yes they can, but it’s not as simple as just buying a company and making extra money from it.

Buying a company means taking on the risk, being involved in an industry you might not be familiar with, and then hoping to make back the amount of money you paid for it.

Think of it this way, if a company was guaranteed to keep making money, for essentially no work, why would the owner even sell it?