A conglomerate is a company that comprises multiple different corporations. The most common type of conglomerate is a parent company with one or more subsidiaries, which are partially or wholly-owned companies.
Corporations form conglomerates for a variety of reasons, including:
- The desire to become involved in a business that is different from the company's main focus.
- A desire to diversify so that, for example losses in one business may be offset by gains in another.
- An intention to transition the company toward a new area of business.
- Attractive revenues, either historical or projected, from the prospective subsidiary.
- A need to protect company's established business from risks associated with the subsidiary.
When a conglomerate owns less than a controlling percentage of another company's voting stock, the second company is known as an associate or an affiliate.
Investopedia.com provides this example:
"For example, the Walt Disney Corporation owns about a 40% stake in the History Channel, an 80% stake in ESPN and a 100% interest in the Disney Channel. In this case, the History Channel is an affiliate company, ESPN is a subsidiary and the Disney Channel is a wholly owned subsidiary company."