List and explain why a company would create subsidiaries instead of integrating the smaller companies into the larger parent to create a single entity

What will be an ideal response?

Parents companies may create subsidiaries to
1. take advantage of income tax savings. Tax advantages can occur for a seller when an acquisition involves selling capital stock of a going concern instead of individual assets.
2. conform to government regulations if a parent company obtains ownership of another company and the government labels the acquisition a violation of antitrust laws.
3. face more favorable treatment from their country of residence. Foreign subsidiaries may face more favorable treatment from their country of residence than a foreign parent corporation would experience.
4. limit the liabilities in a risky venture. By keeping a subsidiary company separate from a parent company, risky liabilities are kept off the parent company's balance sheet, thus, hopefully retaining stock market prices and potential funding options.
5. maintain the ability to easily sell or spin off a subsidiary company. If a parent company would like to rid itself of a portion of its business, it is easier and less costly to sell or spin off that portion when it is already accounted for separately.