Introduction to Holding Company
The term “holding company” refers to any business entity that isn’t directly involved in the manufacturing or selling of goods or services but holds a controlling stake in companies that are actually involved. An entity is said to have a controlling stake in a company when it owns 50% or more of that company because it provides the entity the authority to influence the decisions of the management and the board of directors. The controlling stake entity is known as the holding company or the parent company, while the companies held are known as its subsidiaries. In this topic, we are going to see more about Holding Company Examples.
Typically, a holding company manages multiple businesses and looks to invest available funds into various cash-generating businesses. Some of the major advantages of a holding company include the protection of business assets and tax benefits. It is to be noted that despite owning the assets of the subsidiaries, the holding company only oversees the management decisions but doesn’t participate in the day-to-day activities of the subsidiaries. The procedure to be followed for setting up a holding company is the same as that of any other business.
Examples of Holding Company
Now, let us discuss some of the most popular examples of holding companies from across the world:
Example #1 – The Walt Disney Company
In the year 1923, two brothers – Walt and Roy O. Disney, founded the company named Disney Brothers Cartoon Studio. Later in 1986, it was officially changed to what we know today as The Walt Disney Company. Headquartered in Burbank, California, today, it has become a multinational entertainment and media conglomerate. In the 1980s, the company started creating and acquiring divisions that produced more mature content than what it was originally associated with. Gradually, the company began to earn recognition for its film studio division – The Walt Disney Studios.
The company can be divided into five business segments, out of which two are primary divisions, and three are content groups.
Divisions:
- Disney Media and Entertainment Distribution: It looks after operations, sales, distribution, data, and advertising for content production groups. It also manages direct-to-consumer businesses, including its multiple streaming platforms, home media distribution, theatrical exhibition units, domestic television networks, and the Disney Music Group.
- Disney Parks, Experiences, and Products: It is involved in the management of cruise lines, theme parks, consumer products, travel-related assets, and the publishing division. This division’s assets include Walt Disney World, Disney Cruise Line, Tokyo Disney Resort, Disneyland Resort, Hong Kong Disneyland Resort, Shanghai Disney Resort, Disneyland Paris, Disney Vacation Club, and Adventures by Disney.
Content Groups:
- The Walt Disney Studios: It is where the theatrical entertainment business takes place, which includes Walt Disney Pictures, Lucas Film, Pixar, Walt Disney Animation Studios, Searchlight Pictures, 20th Century Studios, Marvel Studios, Disney Theatrical Group, and Disney Nature.
- Disney General Entertainment: It focuses on the television channels and production segment, which includes Walt Disney Television, FX Networks, ABC News, Disney Branded Television, and National Geographic Partners.
- ESPN and Sports Content: It focuses on streaming live sports programs, sports news, and other original content related to sports for cable channels, ABC, and ESPN+.
Example #2 – Berkshire Hathaway Inc.
It was started by Oliver Chace in the year 1839 as a textile manufacturing company named Valley Falls Company. After several mergers, it finally became the Berkshire Hathaway that we know today. It was in 1962 when Warren Buffett started buying stocks of Berkshire Hathaway. Initially, he focused on its core business of textile manufacturing. However, in 1967, he started venturing into the insurance industry.
In the beginning, Buffett’s focus was on investing in publicly traded companies for the long term. But later, he shifted his focus to purchasing whole companies, and today Berkshire have to hold across different sectors that include retail, home furnishings, railroads, confectionery, jewelry sales, manufacturing of equipment, manufacturing & distribution of textile, regional utility companies, etc.
Headquartered in Omaha, Nebraska, Berkshire today has become a multinational conglomerate that has several subsidiaries, which include GEICO, BNSF, Dairy Queen, Duracell, Net Jets, Fruit of the Loom, Pampered Chef, Flight Safety International, Helzberg Diamonds, Long & Foster, Lubrizol, Shaw Industries, and Forest River. According to Forbes Global 2000, it is the 10th largest conglomerate by revenue and the 8th largest public company in the world.
Example #3 – Citigroup Inc.
Citigroup Inc. is a US-based multinational bank holding that was formed in 1998 through the merger of Citicorp and Travelers Group. Besides Citicorp, the group has several international subsidiaries. Citigroup is part of the Big Four banking institutions in the US alongside Bank of America, JPMorgan Chase, and Wells Fargo.
In 2009, the group announced its reorganization into two operational units – Citicorp and Citi Holdings. Citibank Retail is one of the major units of Citicorp that encompasses more than 4,600 branches globally. With more than $300 billion in customer deposits, Citibank is the 4th largest retail bank in the US. On the other hand, Citi Holdings offers investment and banking products for government entities, institutions, and ultra-high net worth investors. It operates through five divisions: Capital Markets Origination, Markets & Securities Services, Corporate & Investment Banking, Treasury & Trade Solutions, and Citi Private Bank.
Conclusion
So, a holding company refers to an entity that is formed not to participate in any direct business activities but to purchase and own stakes in other operational companies. A holding company owns a management stake that provides it the authority to control the business decisions of the subsidiary companies. Besides, holding companies also offer other benefits, which include potential tax benefits.
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