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

So, how to start? * * * There are several ways to carve up Alphabet, the holding company of which Google is by far the largest and most important piece. — The Editorial Board, BostonGlobe.com, "The case for breaking up Google," 14 June 2018 Under the terms of the DeVry sale, the chain’s stock will be acquired at no cost by Cogswell Education LLC, a holding company registered in Delaware and run by Palmer. — Collin Binkley, The Seattle Times, "Little scrutiny in DeVry sale, as DeVos targets protections," 1 Oct. 2018 Over the years, the brand has been passed from owner to owner, including a private equity group in 2012 and a holding company in 2015, before finding a home with its current Turkish owners in 2017 shortly before its bankruptcy. — Jon Porter, The Verge, "Luxury manufacturer Vertu returns with Aster P smartphones," 19 Oct. 2018 The French holding companies are no longer the only buyers. — Carol Ryan, WSJ, "Luxury Deals Will Be Made in Italy," 16 Nov. 2018 While the Netherlands’ railway network is managed by one entity, the trains running on it are operated by various private and publicly-held companies. — Rick Noack, Washington Post, "Once again, a Japanese train leaves an ‘inexcusable’ 25 seconds early. Why can’t we have the same problems?," 17 May 2018 Now Ferd is a holding company with investments in various industries; Alexandra and Katharina's dad, Johan H. Andresen, is the chairman of the company's board. — Kate Storey, Town & Country, "Meet The World's Youngest Billionaire," 2 Mar. 2016 Smaller banks to get a break Under a bank deregulation bill signed into law by the president last month, bank holding companies with less than $100 billion in assets will no longer be subject to the first round of stress tests. — Lalita Clozel, WSJ, "What to Watch in the Fed’s Stress Tests," 20 June 2018 There are several ways to carve up Alphabet, the holding company of which Google is by far the largest and most important piece. — BostonGlobe.com, "By The Editorial Board," 14 June 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.

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4 Jan 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