The CEO feels that being in commercial property management and the tool hire business will give the company a better balance of cash flows and make the company less risky. This should benefit shareholders. Discuss the merits of this statement. Diversification is a bad idea. Shareholders can usually diversify less expensively than the company can.
Companies are easier to understand if they remain focused.
Information about companies is harder to get at in diversified companies. On the stock market diversified companies usually trade at a discount to other companies. There is a danger that the management don't have the skills to succeed in the other markets. They should stick to their knitting. When diversification may be useful is if it is difficult for shareholders to diversify themselves or if by diversifying the company can maybe take advantage of tax breaks that are not available to shareholders.