A diversification discount occurs because a business is willing to be acquired for a price that is lower than its market value.

Question

Quizplus · Accepted Answer

A diversification discount occurs because investors value a diversified company lower than the sum of its individual parts, often due to the complexity and perceived inefficiencies of managing unrelated businesses, not because a business is willing to be acquired for a lower price.

A Diversification Discount Occurs Because a Business Is Willing to Be