holding company

noun

Definition of holding company

: a company whose primary business is holding a controlling interest in the securities of other companies — compare investment company

Examples of holding company in a Sentence

Recent Examples on the Web

Manafort’s holding company, MC Brooklyn Holdings, also bought a brownstone in Brooklyn, New York, in December 2012 for $2,995,000 that was brokered by Yohai, real estate postings online show. — NBC News, "Manafort's former son-in-law, eyed by Mueller, to plead guilty," 18 May 2018 General Rodríguez is president of Gaesa, the holding company that controls the military’s business interests. — Frances Robles, New York Times, "Fidel Died and Raúl Resigned, but Castros Still Hold Sway in Cuba," 19 Apr. 2018 In the annual tests, required under 2010's Dodd-Frank financial overhaul law, the Fed analyzes whether large bank holding companies have enough capital to absorb losses and continue lending in an economic downturn. — Deon Roberts, charlotteobserver, "The Fed examined how local banks would fare in another downturn. Here's what it found," 21 June 2018 The one-two punch is just the beginning of what appears to be a calculated strategy to sever Shari’s power over both companies, which her father controls through the family holding company, National Amusements (NAI). — William D. Cohan, The Hive, "“The Nuclear Option”: With CBS Going to Court, Shari Redstone’s “Kabuki Theater” Falls Apart," 14 May 2018 Rue La La itself was acquired in 2011 by Kynetic, a holding company that owns other e-commerce entities, according to Fast Company. — Alix Langone, Fortune, "Rue La La Buys Gilt Groupe, Combining Two Popular Flash Sale Sites," 5 June 2018 The Marvel Comics legend co-founded POW! in 2001 as a holding company of sorts for his library of intellectual property. — Anita Bennett, Fortune, "Stan Lee Drops $1 Billion Fraud Lawsuit Against POW! Entertainment," 9 July 2018 The pet superstore sent 20 percent of Chewy’s shares in the form of a dividend to a holding company controlled by its private equity owner BC Partners, according to people with knowledge of the matter. — Katherine Doherty, Bloomberg.com, "PetSmart Moves Part of Chewy.com Out of Creditors' Reach," 4 June 2018 One new firm, a British holding company called Emerdata, was formed in part to bring in new investors, according to a former employee. — Matthew Rosenberg, New York Times, "Justice Department and F.B.I. Are Investigating Cambridge Analytica," 15 May 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'holding company.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Keep scrolling for more

Learn More about holding company

Dictionary Entries near holding company

Statistics for holding company

Last Updated

11 Oct 2018

Look-up Popularity

Time Traveler for holding company

The first known use of holding company was in 1906

See more words from the same year

Keep scrolling for more

More Definitions for holding company

holding company

noun

Financial Definition of holding company

What It Is

A holding company owns controlling interest in another company or owns enough stock to control the company's management and operations. Different legal jurisdictions have different rules about what technically constitutes a holding company.

How It Works

Let's say Company ABC is raising capital and agrees to sell 55% of its shares to Company XYZ in return for $1 billion in cash and debt. Company XYZ and Company ABC remain separate entities and have separate management teams, but because Company XYZ owns 55% of Company ABC's shares, it can vote however it likes and essentially override the wishes of the rest of the shareholders. Accordingly, it has tremendous control over who is elected to the board and who the board employs to run the company, as well as whether and how the company raises more capital or changes operational direction.

Why It Matters

Holding companies often consist of a parent and several subsidiaries. In some cases, holding companies are attempting to monopolize a particular market. They do this via horizontal integration, whereby the holding company purchases a number of competitors, or via vertical integration, whereby the holding company purchases businesses in each stage of a product's lifecycle (that is, it buys suppliers, distributors, wholesalers and retailers of the product).

In most cases, each subsidiary of a holding company operates independently of the holding company's other businesses (although the managers of the subsidiaries work for the managers at the holding company).

One advantage of holding companies is that they are typically very diversified businesses (although some stick to one or two industries). This diversification and the efficiencies brought about by shared or reduced costs often make holding companies less risky businesses than those operating in a single market or niche.

However, holding companies face the real challenge of becoming so big that they are difficult to manage efficiently. They also often fail to realize the anticipated cost savings with each acquisition. This can lead to a lack of focus, which exacerbates the managerial problem and reduces shareholder returns. This in turn is why holding companies often "spin off" subsidiaries into stand-alone entities.

Source: Investing Answers

holding company

noun