Question

With an unrelated diversification strategy, the types of companies that make particularly attractive acquisition targets are

a. companies offering the biggest potential to achieve economies of scope.
b.companies that will help reduce volatility of sales and earnings.
c businesses with excellent cross-business financial fit.
d.companies that are financially distressed or whose assets are undervalued.

Answer 1

In an unrelated diversification strategy, companies that help reduce volatility of sales and earnings make particularly attractive acquisition targets.

Step-by-step explanation:

In an unrelated diversification strategy, the types of companies that make particularly attractive acquisition targets are those that will help reduce volatility of sales and earnings. This is option b. By diversifying into unrelated businesses, a company can offset the risks associated with individual business units and stabilize overall performance. For example, if one business unit experiences a downturn, the other units can potentially compensate for it and maintain profitability.

For instance, if a conglomerate owns companies in different industries, such as a technology company, a healthcare company, and a retail company, it can benefit from the diversified revenue streams and avoid relying solely on one industry. This can help reduce the overall volatility of the conglomerate's sales and earnings.