Conglomeration

AAA

DEFINITION of 'Conglomeration'

The process by which a conglomerate is created, as when a parent company begins to acquire subsidiaries. Sometimes conglomeration can refer to a time period when many conglomerates are formed simultaneously. One of the chief advantages of conglomeration is the immunity that it provides the parent company from potential takeovers.

INVESTOPEDIA EXPLAINS 'Conglomeration'

Conglomeration became an increasingly common and popular process in the 1950s, because it is a convenient way for parent companies to operate several related or complementary firms in conjunction with each other. But conglomeration also provides an avenue for parent firms to diversify into other lines of business.

RELATED TERMS
  1. Divestiture

    The disposal of a business unit through sale, exchange, closure, ...
  2. Conglomerate Boom

    A rapid growth in the number of conglomerates, or big corporations ...
  3. Corporation

    A legal entity that is separate and distinct from its owners. ...
  4. Conglomerate

    A corporation that is made up of a number of different, seemingly ...
  5. Spinoff

    The creation of an independent company through the sale or distribution ...
  6. Yield On Earning Assets

    A financial solvency ratio that compares a financial institution’s ...
RELATED FAQS
  1. What is the theory of asymmetric information in economics?

    The theory of asymmetric information was developed in the 1970s and 1980s as a plausible explanation for common phenomena ... Read Full Answer >>
  2. How does market risk differ from specific risk?

    Market risk and specific risk are two different forms of risk that affect assets. All investment assets can be separated ... Read Full Answer >>
  3. How is perpetuity used in the Dividend Discount Model?

    The basic dividend discount model (DDM) creates an estimate of the constant growth rate, in perpetuity, expected for dividends ... Read Full Answer >>
  4. How valid is the notion of economies of scope?

    The concept of economies of scope is widely accepted in both managerial and theoretical economics. It proposes that it is ... Read Full Answer >>
  5. How can a company resist a hostile takeover?

    Several different defense strategies can be applied by existing corporate boards to ward off a hostile takeover. The most ... Read Full Answer >>
  6. What is the relationship between modified duration and interest rates?

    Modified duration is a formula that measures the value of a bond in relation to changes in interest rates. Modified duration ... Read Full Answer >>
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. Bonds & Fixed Income

    Conglomerates: Risky Proposition?

    Investing in a corporate giant may not be as safe as you think.
  3. Insurance

    The Wonderful World Of Mergers

    While acquisitions can be hostile, these varied mergers are always friendly.
  4. 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.
  5. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  6. Economics

    Understanding Green Field Investments

    A green field investment refers to a company, usually a large multi-national corporation, building a new facility in a foreign country.
  7. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  8. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  9. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.
  10. Economics

    Where To Search For Yield Today

    It’s hard to miss that there has been a pronounced slowdown in the U.S. economy this year.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center