Definition of holding company
: a company whose primary business is holding a controlling interest in the securities of other companies — compare investment company
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Recent Examples of holding company from the Web
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The Treasury Department describes Deripaska as controlling the industrial group Basic Element, a holding company based in Jersey in the Channel Islands.
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Farber received her law degree from the University of Tennessee, worked as a Fortune 500 attorney in Houston and Los Angeles, and currently manages a real estate holding company in Connecticut.
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Endeavor is a holding company that is the latest iteration of the William Morris Agency, founded in 1898 to represent vaudeville talent.
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Profits from the hotel have been redirected to a holding company, Trump Old Post Office LLC, in an effort to distance Trump from the hotel operations.
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All the semiofficial holding companies have major advantages over private businesses in favorable access to capital, tax exemptions and political connections.
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Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, has held early talks about acquiring a stake in Endeavor, the holding company for talent agency WME, Bloomberg News reported, citing unnamed sources familiar with the situation.
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.
First Known Use of holding company
1906
Financial Definition of HOLDING COMPANY
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 Defined for English Language Learners
holding company
Definition of holding company for English Language Learners
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business : a company whose main business is owning more than half of another company's stock
Law Dictionary
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Britannica.com: Encyclopedia article about holding company
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