A conglomerate is a combination of multiple business entities operating in entirely different industries under one corporate group, usually involving a parent company and many subsidiaries. Often, a conglomerate is a multi-industry company. Conglomerates are often large and multinational.
Conglomerates were popular in the 1960s due to a combination of low interest rates and a repeating bear-bull market, which allowed the conglomerates to buy companies in leveraged buyouts, sometimes at temporarily deflated values. Famous examples from the 1960s include Ling-Temco-Vought, ITT Corporation, Litton Industries, Textron, Teledyne. Because of low interest on the loans, the overall return on investment of the conglomerate appeared to grow. Also, the conglomerate had a better ability to borrow in the money market, or capital market, than the smaller firm at their community bank.
For many years this was enough to make the company's stock price rise, as companies were often valued largely on their return on investment. The aggressive nature of the conglomerators themselves was enough to make many investors, who saw a "powerful" and seemingly unstoppable force in business, buy their stock. High stock prices allowed them to raise more loans, based on the value of their stock, and thereby buy even more companies. This led to a chain reaction, which allowed them to grow very rapidly.
However, all of this growth was somewhat illusory and when interest rates rose to offset inflation, conglomerate profits fell. Investors noticed that the companies inside the conglomerate were growing no faster than before they were purchased, whereas the rationale for buying a company was that "synergies" would provide efficiency. By the late 1960s they were shunned by the market, and a major sell-off of their shares ensued. To keep the companies going, many conglomerates were forced to shed the industries they had recently purchased, and by the mid-1970s most had been reduced to shells. The conglomerate fad was subsequently replaced by newer ideas like focusing on a company's core competency.
In other cases, conglomerates are formed for genuine interests of diversification rather than manipulation of paper return on investment. Companies with this orientation would only make acquisitions or start new branches in other sectors when they believed this would increase profitability or stability by sharing risks. Flush with cash during the 1980s, General Electric also moved into financing and financial services, which in 2005 accounted for about 45% of the company's net earnings. GE formerly owned a minority interest in NBCUniversal, which owns the NBC television network and several other cable networks. In some ways GE is the opposite of the "typical" 1960s conglomerate in that the company was not highly leveraged, and when interest rates went up they were able to turn this to their advantage. It was often less expensive to lease from GE than buy new equipment using loans. United Technologies has also proven to be a successful conglomerate.
With the spread of mutual funds (especially index funds since 1976), investors could more easily obtain diversification by owning a small slice of many companies in a fund rather than owning shares in a conglomerate. Another example of a successful conglomerate is Warren Buffett's Berkshire Hathaway, a holding company which used surplus capital from its insurance subsidiaries to invest in a variety of manufacturing and service businesses.
The end of the First World War caused a brief economic crisis in Weimar Germany, permitting entrepreneurs to buy businesses at rock-bottom prices. The most successful, Hugo Stinnes, established the most powerful private economic conglomerate in 1920s Europe – Stinnes Enterprises – which embraced sectors as diverse as manufacturing, mining, shipbuilding, hotels, newspapers, and other enterprises.
The best known British conglomerate was Hanson plc. It followed a rather different timescale than the U.S. examples mentioned above, as it was founded in 1964 and ceased to be a conglomerate when it split itself into four separate listed companies between 1995 and 1997.
In Hong Kong, some of the well-known conglomerates include Jardine Matheson (AD1824), Swire Group (AD1816), (British companies, one Scottish one English; companies that have a history of over 150 years and have business interests that span across four continents with a focus in Asia.) C K Hutchison Whampoa, Sino Group, (both Asian-owned companies specialize business such as real estate and hospitality with a focus in Asia.)
In Japan, a different model of conglomerate, the keiretsu, evolved. Whereas the Western model of conglomerate consists of a single corporation with multiple subsidiaries controlled by that corporation, the companies in a keiretsu are linked by interlocking shareholdings and a central role of a bank. Mitsui, Mitsubishi, Sumitomo are some of Japan's best known keiretsu, reaching from automobile manufacturing to the production of electronics such as televisions. While not a keiretsu, Sony is an example of a modern Japanese conglomerate with operations in consumer electronics, video games, the music industry, television and film production and distribution, financial services, and telecommunications.
In China, many of the country's conglomerates are state-owned enterprises, but there is a substantial number of private conglomerates. Notable conglomerates include BYD, CIMC, China Merchants Bank, Huawei, JXD, Ping An Insurance, TCL Corporation, Tencent, TP-Link, ZTE, Legend Holdings, Dalian Wanda Group, China Poly Group, Beijing Enterprises, and Fosun International. Fosun is currently China's largest civilian-run conglomerate by revenue.
In South Korea, the chaebol are a type of conglomerate owned and operated by a family. A chaebol is also inheritable, as most of current presidents of chaebols succeeded their fathers or grandfathers. Some of the largest and most well-known Korean chaebols are Samsung, LG, Hyundai Kia and SK.
The era of Licence Raj (1947–1990) in India created some of Asia's largest conglomerates, such as the Tata Group, Kirloskar Group, Larsen & Toubro, Mahindra Group, Sahara India, ITC Limited, Essar Group, Reliance ADA Group, Reliance Industries, Aditya Birla Group and the Bharti Enterprises.
In New Zealand, Fletcher Challenge was formed in 1981 from the merger of Fletcher Holdings, Challenge Corporation, and Tasman Pulp & Paper, in an attempt to create a New Zealand-based multi-national company. At the time, the newly merged company dealt in construction, building supplies, pulp and paper mills, forestry, and oil & gas. Following a series of bungled investments, the company demerged in the early 2000s to concentrate on building and construction.
In the Philippines, the largest conglomerate of the country is the Ayala Corporation which focuses on malls, bank, real estate development, and telecommunications. The other big conglomerates in the Philippines included JG Summit Holdings, Lopez Group of Companies, SM Investments Corporation, Metro Pacific Investments Corporation and San Miguel Corporation.
In Canada, one of the examples is Hudson's Bay Company.
Some cite the decreased cost of conglomerate stock (a phenomenon known as conglomerate discount) as evidential of these disadvantages, while other traders believe this tendency to be a market inefficiency, which undervalues the true strength of these stocks.
Although a relatively new development, Internet conglomerates, such as Alphabet, Google's parent company belong to the modern media conglomerate group and play a major role within various industries, such as brand management. In most cases Internet conglomerates consist of corporations who own several medium-sized online or hybrid online-offline projects. In many cases, newly joined corporations get higher returns on investment, access to business contacts, and better rates on loans from various banks.
Similar to other industries there are many companies that can be termed as conglomerates.
Arif Habib Group is a business conglomerate company based in Karachi, Pakistan. It was founded by Pakistani businessman Arif Habib.The group consists of 13 companies spanning the real estate, financial services, energy, cement, steel and fertiliser production sectors. As of 2012, it had over 11,000 employees and an annual revenue of Rs. 100 billion.Army Welfare Trust
Army Welfare Trust, also known as Askari Group of Companies, is a Pakistani conglomerate company run by Pakistan Army. It is based in Rawalpindi, Pakistan. The business is run by the Pakistan Army along with Fauji Foundation.Attock Petroleum Limited
Attock Petroleum Limited is Pakistani oil marketing company based in Rawalpindi, Pakistan. It started its operations in 1998 and is third largest oil marketing company in Pakistan.It is part of Pakistani conglomerate company Attock Group.It has filling stations in Khyber Pukhtunkwa, Kashmir, Gilgit Baltistan, Balochistan, Punjab and Sindh. It also provides CNG at selected stations. Other facilities include tire shop, mosques, and resting areas.The company also opened two filling stations in Jalalabad, making it the first oil marketing company in Afghanistan.Bonifacio Transport Corporation
Bonifacio Transport Corp., or more commonly known as BGC Bus or formerly The Fort Bus, is an intercity bus company in Metro Manila, Philippines operated under Fort Bonifacio Development Corporation (FBDC), an affiliate company under Ayala Corporation, one of the largest conglomerate company established during the Spanish era. It plies routes from EDSA in Makati to Bonifacio Global City in Taguig via McKinley Road.
This bus company was regarded as the first non-EDSA Metro Manila bus that traverses from one business district to another.Conglomerate
Conglomerate or conglomeration may refer to:
Conglomerate (mathematics)In popular culture:
The Conglomerate (American group), a production crew and musical group founded by Busta Rhymes
Conglomerate (record label), a hip hop label founded by Busta Rhymes
The Conglomerate (Australian group), a jazz quartet
The Conglomerate (comics), a superhero team in the DC Comics universeDemirören Group
Demirören Group is a Turkish conglomerate company. Its properties include Milangaz (a liquefied petroleum gas distributor with 9% of the Turkish market), the Demirören İstiklal shopping mall in Beyoğlu, as well as several newspapers, television and radio stations.
Demirören acquired the newspapers Milliyet and Vatan in May 2011. In 2018 the holding bought the newspaper Hürriyet, the TV station Kanal D and all other media properties of Doğan Group.Milangaz sponsored the Beşiktaş men's basketball team in 2011-12.Essel Group
Essel Group is an Indian conglomerate company presently headed by Dr. Subhash Chandra, based in Mumbai, Maharashtra, and established in 1926.Grupo Carso
Grupo Carso or Grupo Sanborns SAB is a Mexican global conglomerate company owned by Carlos Slim. It was formed in 1990 after the merger of Corporación Industrial Carso and Grupo Inbursa. The name Carso stands for Carlos Slim and Soumaya Domit de Slim, his late wife.
In May 2014, the conglomerate had a stock market capitalisation of over $12 billion US dollars.In 1996 Carso Global Telecom (which includes Telmex, Telcel and América Móvil) separated itself from Grupo Carso.House of Habib
The House of Habib is a Pakistani conglomerate company which is based in Karachi, Pakistan. The group was founded by Habib Esmail in 1841.
It is a prominent Khoja business family in Pakistan.ITC Limited
ITC Limited is an Indian multinational conglomerate company headquartered in Kolkata, West Bengal.Established in 1910 as the 'Imperial Tobacco Company of India Limited', the company was renamed as the 'India Tobacco Company Limited' in 1970 and later to 'I.T.C. Limited' in 1974. The dots in the name were removed in September 2001 for the company to be renamed as 'ITC Limited' where 'ITC' would no longer be an acronym. The company completed 100 years in 2010 and as of 2012-13, had an annual turnover of US$8.31 billion and a market capitalization of US$50 billion. It employs over 30,000 people at more than 60 locations across India and is part of Forbes 2000 list.Jindal Group
The O.P. Jindal Group is an Indian conglomerate company founded by O.P. Jindal in 1969. The current CEO is Naveen Jindal, the youngest son of the late O P Jindal.Massive Dynamic
Massive Dynamic is a fictional multinational conglomerate company from the TV series Fringe that develops the advancement of weapons testing, robotics, medical equipment, aeronautics, genetics, pharmaceuticals, telecommunication, energy, transportation, and entertainment technology. Fictionally, the headquarters of Massive Dynamic is located at 655 18th Street, New York ("Olivia"). However, in reality, the exterior of the new 7 World Trade Center in Lower Manhattan is used as its headquarters. For the pilot episode, interior scenes of Massive Dynamic were filmed in the Michael Lee-Chin Crystal entrance of the Royal Ontario Museum in Toronto, Ontario. In the episode "Brown Betty", Massive Dynamic's headquarters are located in the South Tower of the original World Trade Center.
Their ongoing slogan was: "What do we do? What don't we do!"Metcash
Metcash (ASX: MTS) is an Australian conglomerate company distributing and marketing groceries, fresh produce, alcoholic beverages, hardware, and other consumer goods. Notable retailers the company owns include IGA, Mitre 10 and Home Timber & Hardware.Nishat Group
Nishat Group (Urdu: نِشاط) is a Pakistani multinational conglomerate company which was founded by Pakistani business magnate Mian Muhammad Mansha. It is based in Lahore, Pakistan.
The company is listed on all three stock exchanges of Pakistan.SOMED
SOMED (French: Société Maroco-Emiratie de Développement) is a conglomerate company based in Morocco. Its active in a range of sectors such as mining, construction material dealership, tourism, real estate development, food processing and Car dealership. Its capital is composed of Mohammed VI's holding company SNI, Emirati private funds and the Moroccan state.SUN Group
SUN Group is an Indian media conglomerate company based in Chennai, Tamil Nadu, India. It was founded by Kalanithi Maran in 1992.Sistema
AFK Sistema PAO is a large Russian conglomerate company, headed by Vladimir Yevtushenkov. In March 2006, Yevtushenkov controlled 62% of the shares in Sistema.Sistema has its headquarters in Moscow. The company's Global Depository Receipts (GDRs) are traded on the London Stock Exchange (ticker symbol LSE: SSA).Sunway Group
Sunway Berhad (Chinese: 双威集团) (MYX: 5211) or Sunway Group is a Malaysian conglomerate company. It was formed following a merger between Sunway City Berhad (SunCity) and Sunway Holdings Berhad on 23 August 2011.Sunway Holdings Incorporated Berhad commenced operations in 1986, mainly to develop the Bandar Sunway township in Petaling Jaya. It was listed on Bursa Malaysia Securities Berhad on 16 February 1984. Sunway City Berhad on the other hand, was incorporated in 1982 and engages in the investment and development of residential, commercial, retail, leisure, and healthcare properties primarily in Asia and Australia.
Following the success of the Sunway City township, the Group diversified into property investment, leisure and entertainment, hospitality and healthcare. Today Sunway maintains property development and construction as its two core businesses and key contributors to profitability.Yousuf Dewan Companies
The Yousuf Dewan Companies (YDC) is a conglomerate company based in Karachi, Sindh, Pakistan. It is currently owned by the former Sindh Finance Minister Dewan Mohammad Yousuf Farooqui.