Large,successful companies in general have strong balance sheets. The combination ofa strong balance sheet with an entrepreneurial spirit, a favorable environment,money (access to it) and creativity is giving room to a more recent trend ofexpansion of large companies via horizontal or vertical integration anddiversification.This the creation of large and sometime diversified groups - is something that ispart of the development of the Capitalism, Brazilian included. Nevertheless atthe rate that we see some companies doing deals (one after another) we suspectthat there is a likely risk of indigestion after all, money is not the onlyresource necessary to properly run a business. Growthis, without a doubt, the engine of capitalism. The absence of growth is anindication that something is not going well either at the companys, at the industrys or countrys level. Oncea company has a proven management model, available financial and humanresources and yet strong systems andprocesses (IT and internal controls) a logical step would grow faster viaacquisition (or inorganically). Normally, first option would be to target ahorizontal expansion by acquiring an existing competitor with the aim ofserving new customers (new regions) or the same customers by being morerepresentative (selling more to them) and / or offering new products. A natural second option would be that of avertical integration. Basically it means moving up (stream) or down (stream) inthe value chain (encompassing the production and distribution of theirproducts). This move allows a company to either capture more margin or havemore control over strategic elements or components of the chain. A third optionis that of a diversification, moving into another industry. For its turn thiscould be a diversification towards related or non-related industries. Arelated industry diversification example would be that of a retail companywhen it moves into Financial Services, Real Estate and even Food production.The logic behind involves: cross selling (to customers) in the case offinancial services, having more control on one important element of thebusiness, the real estate and in the case of food production (bakery, meat anddairy products) capture more margin and quality & productivity. A non-related industry diversificationexample would be that adopted by an industrial group when it decides to enter inthe investment area (private equity) or construction. Casesare made for and against diversification through the formation ofconglomerates, or of a corporation engaged in two or more unrelated businesses.In common one element used by both for and against is that of: not having all eggs in one basket. Forthose in favor of conglomerates it (the expression) means risk mitigation aswhen one business is suffering other(s) is (are) compensating for it. For thoseagainst conglomerates the lack of specialization means less efficiency, morecomplacency. To add more to this discussion even the mighty GE has recentlyrecognized that specialization is necessary in order to manage a business.Onecannot fight facts thus a discussion of whether makes sense to buildconglomerates or not is out of place. My point is more related to the elementsnecessary to run a more complex and diverse business. In an expansion towards anon-related industry what a strong new comer may bring is the combination offinancial resources, good management and access to good people