ABSTRACT
This chapter contains related diversification grid; the principles on which it is based; underlying assumptions; guidance on application, and relevant issues; and related models. An organization considering 'related' diversification through acquisition should appraise the target company's strengths within its particular industry sector. The model help with the identification of candidate acquisitions with high potential through an analysis of acquiring company strengths. Related acquisitions are normally less problematic than unrelated acquisitions, but the degree and area of relationship are critical. A good fit with respect to culture, management style and cash flow between the company and the target acquisition is essential if the acquisition is to succeed. Related diversification can result in lower unit costs and improved margins through synergy. The model may assist with the development of strategic actions designed to overcome weaknesses and/or capitalize on strengths in the parent company through acquisition. Analysis of the portfolio of business units of a diversified company is facilitated by the model.
