A conglomerate is a business structure where two or more independent companies come together under one. A parent company has control over one or more subsidiaries, essentially owning these smaller entities and overseeing their operations.
A conglomerate must own half of their shares, to control its subsidiaries. There are two options. This can be direct, where the parent company owns most of the shares straightforwardly. It can also be indirect, where the parent company owns shares through its other companies, and combined, these shares make up a majority, allowing the parent company to control the conglomerate.
Operational scale
Operating as a conglomerate is a common strategy in large-scale business operations. In these vast corporations, there might be many shareholders, but having multiple companies come together under a single parent entity enables the conglomerate to have stronger control over its subsidiaries.
Examples of conglomerates
An example of conglomerates can be the food industry. A parent company might own some subsidiaries, where each focusing on different product lines.
Consider Wesfarmers as an example of a conglomerate. It owns several different companies that make a variety of products. Wesfarmers is involved in various industries including retail, chemicals, fertilizers, coal mining, and industrial and safety products, highlighting its wide-ranging operations.