What is Unrelated Diversification?
It is when a business adds new, or unrelated, product lines or markets. For example, the same phone company might decide to go into the television business or into the radio business. This is unrelated diversification: there is no direct fit with the existing business. Why would a company want to engage in unrelated diversification? Because there may be cost efficiencies. Or the acquisition might provide an offsetting cash flow during a seasonal lull. The driver for this acquisition decision is profit it needs to be a low risk investment, with high potential for return.
