# Conglomerate: What It Is and How It Works

> **Definition**
>
> A conglomerate consists of multiple independent businesses, with one company owning a controlling stake.

## What Is a Conglomerate?

A conglomerate is a corporation of several different, sometimes unrelated, businesses. In a conglomerate, one [company](https://www.investopedia.com/terms/c/company.asp) owns a controlling stake in several smaller companies, conducting business separately and independently.

Conglomerates often diversify business risk by participating in many different markets, although some conglomerates elect to participate in a single-sector [industry](https://www.investopedia.com/terms/i/industry.asp).

### Key Takeaways

*   A conglomerate is a corporation made up of several different, independent businesses.
*   In a conglomerate, one company owns a controlling stake in smaller companies that each conduct business operations separately.
*   Conglomerates can be created through mergers or acquisitions.  
    

![Conglomerate: A corporation made up of several different, independent businesses.](https://www.investopedia.com/thmb/_dNGeteb6_CCdrMFIxnOhtkFLPw=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Conglomerate_final_rev-1b7d5bca6813495cb54c86b5c98043f1.png)

*— Michela Buttignol / Investopedia*

## History of Conglomerates

Conglomerates are large [parent companies](https://www.investopedia.com/terms/p/parentcompany.asp) with smaller independent entities that may operate across multiple industries. Each of a conglomerate’s [subsidiary](https://www.investopedia.com/terms/s/subsidiary.asp) businesses runs independently of the other business divisions, but the subsidiaries’ managers report to the senior management of the parent company. Many conglomerates are thus multinational and multi-industry [corporations](https://www.investopedia.com/terms/c/corporation.asp).

A [conglomerate boom](https://www.investopedia.com/terms/c/conglomerate-boom.asp) occurred in the 1960s. [Interest rates](https://www.investopedia.com/terms/i/interestrate.asp) were low, so leveraged buyouts were easier for managers of big companies to justify because the money came relatively cheap. As long as company profits exceeded the interest paid on loans, the conglomerate received a [return on investment (ROI)](https://www.investopedia.com/terms/r/returnoninvestment.asp). The [synergy](https://www.investopedia.com/terms/s/synergy.asp) grew, with the cross-combining of companies, products, and markets and helped justify [mergers and acquisitions](https://www.investopedia.com/terms/m/mergersandacquisitions.asp). The boom peaked in 1980 as interest rates adjusted to [inflation](https://www.investopedia.com/terms/i/inflation.asp).

Purchased companies sometimes do not improve their performance. Mismanaged and misunderstood by the parent company, they may drag down the entire corporation’s bottom line. In response to falling profits, conglomerates may divest the companies they bought, downsizing and returning to their core businesses or continuing as [shell corporations](https://www.investopedia.com/terms/s/shellcorporation.asp).

### 1968

The peak year of the conglomeration trend in the United States, according to the book “The Go-Go Years: The Drama and Crashing Finale of Wall Street’s Bullish 60s.” Around 4,500 mergers occurred that year, and 10 of the country’s 200 largest companies were conglomerates by that time.

## Forming a Conglomerate

*   **Acquisitions:** When one company buys another company, it is an [acquisition](https://www.investopedia.com/terms/a/acquisition.asp). If a target firm is big enough, it might not become a mere subsidiary; instead, it and the acquiring company might [merge](https://www.investopedia.com/terms/m/merger.asp), combining their talent, assets, resources, and personnel into one new legal entity. A conglomerate merger occurred when The Walt Disney Company merged with the American Broadcasting Company (ABC) in 1995.
*   **Expansions:** This strategy represents a corporate restructuring and reorganization, and sometimes the creation of a parent company to own various smaller ones. In 2015, Google Inc. restructured. The corporate parent became Alphabet, and Google became a separate subsidiary.  
    
*   **Extensions:** Expanding a family business or a historic, one-sector business into new industries or areas. [Berkshire Hathaway](https://www.investopedia.com/articles/markets/041714/how-warren-buffett-made-berkshire-hathaway-worldbeater.asp) sprang from two 19th-century Massachusetts cotton mills that merged in 1955. Warren Buffett gained control of it in 1965, making Berkshire Hathaway a [holding company](https://www.investopedia.com/terms/h/holdingcompany.asp) to invest in other businesses, rather than manufacture products or provide services.  
    

## Advantages and Disadvantages

Holding many companies in different industries can be a boon for a conglomerate's [bottom line](https://www.investopedia.com/terms/b/bottomline.asp). Poorly performing companies are offset by other sectors. [Cyclical](https://www.investopedia.com/terms/c/cyclicalstock.asp) companies can be balanced by [counter-cyclical](https://www.investopedia.com/terms/c/countercyclicalstock.asp) or noncyclicals. The parent corporation can reduce costs by utilizing fewer inputs that may be shared across subsidiaries. Companies owned by conglomerates have access to internal [capital](https://www.investopedia.com/terms/c/capital.asp) markets, enabling greater ability to grow as a company. Conglomeration may provide immunity from the takeover of the parent company.

Economists have discovered that the size of conglomerates can hurt the value of their stock, known as the [conglomerate discount](https://www.investopedia.com/terms/c/conglomeratediscount.asp). The sum of the values of the individual companies held tends to be greater than the value of the conglomerate’s stock up to 15%. Conglomerates can become so vastly diversified and complicated that they grow too challenging to manage efficiently.

The financial health of a conglomerate can be difficult for investors, analysts, and regulators to evaluate. Some economists argue that large and far-flung conglomerates can become inefficient and costly to maintain, eroding [shareholder](https://www.investopedia.com/terms/s/shareholder.asp) value. Conglomerates that don't succeed reduce the number of businesses under their management to a few choice subsidiaries through [divestiture](https://www.investopedia.com/terms/d/divestiture.asp) and [spinoffs](https://www.investopedia.com/terms/s/spinoff.asp).

> **Important**
>
> The parent company may reduce the risks of being in a single market by becoming a conglomerate, diversified across several industry sectors.

## Examples

Conglomerates can be found in industries like manufacturing, media, or food. A media conglomerate may own several newspapers, and move to purchase television and radio stations, and book publishing companies. A food conglomerate may start by selling potato chips, diversify by buying a soda company, and expand by purchasing other companies that make different food products. [Conglomeration](https://www.investopedia.com/terms/c/conglomeration.asp) describes the process by which a conglomerate is created when a parent company begins to acquire subsidiaries.

Moët Hennessy Louis Vuitton ([LVMUY](https://www.investopedia.com/markets/quote?tvwidgetsymbol=LVMUY)), commonly referred to as LVMH began as a family business in 1854—a luggage and leather goods maker named after Louis Vuitton, after its founder. [LVMH](https://www.investopedia.com/articles/insights/081816/top-7-companies-owned-louis-vuitton-lvmuy.asp) resulted from the merger between Vuitton and wine and spirits company Moët Hennessy. LVMH is the holding company for 75 different subsidiaries in six different sectors, ranging from jewelry (Tiffany & Co.) and cosmetics (Givenchy Parfums) to publications (_Le Parisien_) and designer clothing (Fendi).

Warren Buffett’s Berkshire Hathaway ([BRK.A](https://www.investopedia.com/markets/quote?tvwidgetsymbol=BRK.A)) has successfully managed companies involved in everything from plane manufacturing and textiles to insurance and real estate. Buffett manages the [capital allocation](https://www.investopedia.com/terms/c/capital_allocation.asp) and allows companies near-total discretion when managing their business. Berkshire Hathaway has a majority stake in over 50 companies and minority holdings in dozens more.

## Foreign Conglomerates

Japan’s conglomerate is called _keiretsu,_ where companies own small shares in one another and are centered around a core bank. This business structure can be defensive, protecting companies from wild rises and falls in the stock market and hostile takeovers. Mitsubishi is an example of a company engaged in a keiretsu model.

South Korea’s conglomerates are called _chaebol,_ a type of family-owned company where the position of president is inherited by family members, who ultimately have more control over the company than shareholders or board members. Chaebol companies include Samsung, Hyundai, and LG.

## What Company Is the Biggest Conglomerate?

As of February 10, 2025, the biggest global conglomerate based on market value is Samsung, whose [market capitalization](https://www.investopedia.com/terms/m/marketcapitalization.asp) is $254.87 billion.

## Is Meta a Conglomerate?

Meta Platforms Inc. ([META](https://www.investopedia.com/markets/quote?tvwidgetsymbol=META)), the parent of Facebook, can be considered a conglomerate. It has acquired [several firms](https://www.investopedia.com/articles/personal-finance/051815/top-11-companies-owned-facebook.asp) including Instagram, WhatsApp, Oculus VR, Onavo, and Beluga.

## What Is a Multinational Conglomerate?

A multinational conglomerate is a company that owns other companies or businesses in at least one country other than the one where it’s headquartered. Though similar to a [multinational corporation (MNC)](https://www.investopedia.com/terms/m/multinationalcorporation.asp), it’s not the same, as an MNC could be a firm with subsidiaries, operations, or other holdings in foreign nations, as opposed to separate companies.

## The Bottom Line

A conglomerate is a corporation composed of several different, independent businesses. One company owns a controlling stake in several smaller companies, all of which conduct business separately and independently.  

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>
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