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Why Buy Outside of Your Core Area of Expertise

Posted by on July 31, 2009

Why would you consider purchasing a company that is in a segment that you know nothing about, and it doesn’t seem like a synergistic opportunity? Because the purpose of growing businesses is GROWTH, and none of us are smart enough to know where the economy is headed, nor the future mindset of consumers.

So it’s ok to consider buying a company that is spinning off scads of cash, if the management team is in place. Or if you have proprietary methods of operation that you see would benefit in an integration of another opportunity.

This happens all the time, where one kind of company turns into another, albeit it doesn’t always work out, but in the short term can provide some real benefits.

The current incarnation of Time Warner started as a parking lot operator. Seagram’s Liquor became an entertainment company for a period. GE started with electricity, moved into hardware, media, and now is largely a commercial finance company.

I know of a publicly traded company that started in Internet services, moved into homeland security, and is now an energy exploration company.

It’s all about growth, and returning value to shareholders, even if the only shareholders are you and your immediate family.

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