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

State and federal laws in recent decades have held companies more accountable than in the past, but critics say huge loopholes all but ensure that some of today’s mines will foul waterways or require perpetual cleanups. — Matthew Brown, The Seattle Times, "50M gallons of polluted water pours daily from US mine sites," 20 Feb. 2019 International Consolidated Airlines Group has become Europe’s model for airline mergers since Chief Executive Willie Walsh formed a holding company to manage the combination of British Airways and Spanish flagcarrier Iberia eight years ago. — Jon Sindreu, WSJ, "Why Airlines Are Rebuilding the Conglomerate," 5 Mar. 2019 In 1902, White Star had become a property owned by the International Mercantile Marine Co. (IMM), a holding company bankrolled by famed financier J.P Morgan. — David Grossman, Popular Mechanics, "The Wild Conspiracy That the Titanic Never Sank," 27 Feb. 2019 The removal agreement, struck in mid-December and executed late Sunday, required Mr. Deripaska to reduce his stake to 44.95% in the holding company, EN+ Group PLC. — Samuel Rubenfeld, WSJ, "Former Rusal Chair ‘Astonished’ U.S. Pushed Him Out," 31 Jan. 2019 As recently as 2015, Lei himself also remained an investor through NewQuest Ventures LLC, another holding company, according to SEC filings. — Washington Post, "Trump campaign chief lends name to penny stock tied to felon," 27 Feb. 2018 Pichai became Google's CEO in 2015, taking over from co-founder Larry Page who became CEO of Alphabet, the holding company that owns Google. — Chris Ciaccia, Fox News, "Google employees quit over controversial China search engine project, report says," 13 Sep. 2018 But Tesla has thousands of shareholders, and SEC regulations specifically prohibit privately held companies from having more than 2,000 shareholders. — Timothy B. Lee, Ars Technica, "Analysis: Why Elon Musk abandoned his plan to take Tesla private," 25 Aug. 2018 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

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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18 Apr 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