Conglomerate Boom

AAA

DEFINITION of 'Conglomerate Boom'

A rapid growth in the number of conglomerates, or big corporations made up of many companies spanning multiple and often unrelated fields or industries. The major boom in conglomerate formation occurred in the period following World War II thanks in part to low interest rates, which helped finance leveraged buyouts.

BREAKING DOWN 'Conglomerate Boom'

Conglomerates flourished in the 1960s thanks to low interest rates and a market that fluctuated between bullish and bearish, providing good buyout opportunities for acquiring companies. However, when interest rates began to rise again in the '70s, many of the biggest conglomerates were forced to spin off or sell many of the companies they'd acquired, particularly when they'd only done so to raise more loans and had failed to increase the efficiency of the companies they'd absorbed.


That said, conglomerates can be advantageous, particularly if the conglomerate is well-diversified. For example, Berkshire Hathaway is a conglomerate holding company that has operated very successfully for years.

RELATED TERMS
  1. Conglomerate

    A company that owns controlling stake in a number of smaller ...
  2. Holding Company

    A parent corporation that owns enough voting stock in another ...
  3. Capital

    1) Financial assets or the financial value of assets, such as ...
  4. Chaebol Structure

    A business conglomerate structure that originated in South Korea ...
  5. Conglomeration

    The process by which a conglomerate is created, as when a parent ...
  6. Corporation

    A legal entity that is separate and distinct from its owners. ...
Related Articles
  1. Investing Basics

    Conglomerates: Cash Cows Or Corporate Chaos?

    Huge companies may not be as infallible as previously assumed. Find out why bigger isn't always better.
  2. Entrepreneurship

    Biggest Merger and Acquisition Disasters

    Find out which companies collapsed after merging.
  3. Bonds & Fixed Income

    Conglomerates: Risky Proposition?

    Investing in a corporate giant may not be as safe as you think.
  4. Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  5. Investing

    Use Breakup Value To Find Undervalued Companies

    Find out a company's worth if it were sold in pieces - it may be more than you think.
  6. Insurance

    The Wonderful World Of Mergers

    While acquisitions can be hostile, these varied mergers are always friendly.
  7. Options & Futures

    What Makes An M&A Deal Work?

    Do you know why companies merge? Here we'll take a look at three successful company acquisitions and why they succeeded.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  9. Markets

    Trader Joe's Stock Doesn’t Exist. Here’s Why

    Learn about Trader Joe's and how it operates. Understand why Trader Joe's has chosen not to be a public company and why it should remain that way.
  10. Mutual Funds & ETFs

    ETF Analysis: WisdomTree SmallCap Earnings

    Discover the WisdomTree Small Cap Earnings ETF, a fund with a special focus on small-cap and micro-cap stocks with positive earnings.
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  3. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  4. How can EV/EBITDA be used in conjunction with the P/E ratio?

    Because they provide different perspectives of analysis, the EV/EBITDA multiple and the P/E ratio can be used together to ... Read Full Answer >>
  5. How can a company reduce the unsystematic risk of its own security issues?

    Companies can reduce the unsystematic risk of their own security issues simply by doing the most effective job possible of ... Read Full Answer >>
  6. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  3. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  4. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  5. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  6. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!