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

To hold companies accountable, the state must also instigate high penalties for failing to disclose or falsifying this information. — Ma Jun, Time, "How China Can Truly Lead the Fight Against Climate Change," 12 Sep. 2019 Unionizing, supporters say, would also allow employees to hold companies accountable for harassment, unfair pay practices, and other civil and human rights issues. — Michelle Cheng, Quartz at Work, "Union pushes at places like YouTube and WeWork could transform white-collar work," 1 Sep. 2019 Although the Oklahoma judge ruled that Johnson & Johnson’s behavior violated the state’s public nuisance law, similar attempts to hold companies accountable for their harmful products have fallen short in other cases. — Katie Thomas, New York Times, "Johnson & Johnson’s Brand Falters Over Its Role in the Opioid Crisis," 27 Aug. 2019 New York, Oregon, Maryland, and Connecticut have extended the statute of limitations to give employees a greater opportunity to hold companies accountable. — Fortune, "The Real Legal Changes Brought About By #MeToo: The Broadsheet," 9 Aug. 2019 Investors will rebel and hold companies accountable for the damage to their brand. — Will Carter For Cnn Business Perspectives, CNN, "Companies get off too easy with data breaches. Bigger fines are a good place to start," 31 July 2019 While Senators Elizabeth Warren and Mark Warner have been active in fighting for broad legislative changes that hold companies accountable for the loss of information, Congress hasn’t played ball. — Kristina Libby, Popular Mechanics, "The Capital One Hack Probably Put Your Data on the Dark Web," 30 July 2019 Sponsored by advocacy group Common Sense, the law will give consumers the right to know what data is collected on them, the chance to opt out of collection and to hold companies accountable for unauthorized release of their information. — John Woolfolk, The Mercury News, "Here’s how tech companies want to change California’s landmark Consumer Privacy Act," 29 July 2019 The agency relies on its authority to regulate unfair and deceptive trade practices to hold companies accountable for data-security representations. — Los Angeles Times, "Equifax to pay up to $700 million in data-breach settlement," 22 July 2019

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.

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Last Updated

11 Oct 2019

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The first known use of holding company was in 1906

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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