Subsidiaries and Core Businesses During previous merger booms, a number of compan...

Subsidiaries and Core Businesses

During previous merger booms, a number of companies acquired many subsidiaries that often were in businesses unrelated to the acquiring company’s central operations. In many cases, the acquiring company’s management was unable to manage effectively the many diverse types of operations found in the numerous subsidiaries. More recently, many of these subsidiaries have been sold or, in a few cases, liquidated so the parent companies could concentrate on their core businesses.

Required

a. In 1986, General Electric acquired nearly all of the common stock of the large brokerage firm Kidder, Peabody Inc. Unfortunately, the newly acquired subsidiary’s performance was very poor. What ultimately happened to this General Electric subsidiary?

b. What major business has Sears Holdings Corporation been in for many decades? What other businesses was it in during the 1980s and early 1990s? What were some of its best-known subsidiaries during that time? Does Sears still own those subsidiaries? What additional acquisitions have occurred?

c. PepsiCo is best known as a soft-drink company. What well-known subsidiaries did PepsiCo own during the mid-1990s? Does PepsiCo still own them?

d. When a parent company and its subsidiaries are in businesses that are considerably different in nature, such as retailing and financial services, how meaningful are their consolidated financial statements in your opinion? Explain. How might financial reporting be improved in such situations?