Companies belonging to the holding enter into commercial transactions on their own behalf. However, the right to resolve the main issues related to their activities belongs to the holding company.
The advantages of holding companies are that they fight with competitors by combining their efforts.
- Parent company in the holding:
- Characteristic features of the holding
- Holding companies
- Types of holdings
- Examples of Russian holdings:
- Depending on the method of establishing control of the parent company over subsidiaries, there are:
- Depending on the types of work and functions performed by the parent company, there are:
- From the point of view of the production relationship of companies, there are:
- Depending on the degree of mutual influence of companies, there are:
Parent company in the holding:
- develops a general concept for the development of the holding;
- forms a unified strategy for investment and financial activities;
- manages subsidiaries;
- performs the functions of selling finished products and purchasing material resources;
- carries out foreign economic activity;
- conducts internal lending and financing within the framework of the Association.
But with the establishment of holding companies there is a real possibility of revival of administrative methods of management.
Therefore, the management of holdings consists mainly in changing inefficient management during the shareholders meeting and financial management (dividend policy, issue of securities, etc.).
The parent company’s control over its subsidiaries is exercised both through its dominant participation in their authorized capital, through the determination of their business activities (for example, by performing the functions of their sole Executive body), and in other ways provided for by law.
Characteristic features of the holding
- Concentration of shares of firms in various industries and sectors of the economy or firms located in different regions.
- Multi-layered.. Often, a holding company is a pyramid headed by one or two firms, often multinational.
- Centralization of management within the group through the development of a global policy by the parent company and coordination of joint actions of enterprises in the following areas:
- developing common tactics and strategies on a global scale;
- reorganization of companies and determination of the internal structure of the holding company;
- implementation of inter-company relations;
- financing of investments in the development of new products;
- providing consulting and technical services.
In the form of a holding company, which may include manufacturing, transport, purchasing, sales, and service firms, large commercial structures are created — trading houses (abroad they are most often multinational corporations).
Holding companies (systems) include the parent company, subsidiaries, etc.
A holding company can be registered in any organizational and legal form (more often than not, but it can also be an LLC.
Along with financial leverage, others are used, for example, technical policy, i.e. the concentration of scientific research and technical development in a single center of the parent company and the presentation of results by subsidiaries.
Such tools can be the distribution of the product range and sales markets between subsidiaries (“Siemens”, “Singerr”, etc.).
Types of holdings
There are two types of holdings: financial and mixed (non-financial).
Financial is a holding company where more than 50% of the capital is made up of securities of other enterprises. The main role in the activities of such a holding is played by financial transactions, it does not have the right to perform other types of activities, since it combines capital, and not enterprises.
Mixed — characterized by the fact that its material company has the right to conduct its own economic activities. They are most suitable for knowledge-intensive and technologically connected enterprises with complex activities.
Examples of Russian holdings:
- RAO “UES of Russia”;
- “RAO Gazprom”;
- oil companies “LUKOIL”;
In addition to simple holdings that represent one parent company and one or more subsidiaries controlled by it, there are also more complex holding structures in which subsidiaries themselves act as parent companies in relation to other companies. At the same time, the parent company, which is at the head of the entire structure of the holding, is called the holding company.
Depending on the method of establishing control of the parent company over subsidiaries, there are:
- a property holding company in which the parent company holds a controlling stake in the subsidiary;
- a contractual holding company in which the parent company does not have a controlling stake in the subsidiary, and control is carried out on the basis of an agreement concluded between them.
Depending on the types of work and functions performed by the parent company, there are:
- a net holding company in which the parent company owns controlling stakes in subsidiaries, but does not conduct any production activities itself, but performs only control and management functions;
- a mixed holding company in which the parent company conducts business, produces products, provides services, but also performs management functions in relation to subsidiaries.
From the point of view of the production relationship of companies, there are:
- an integrated holding company in which enterprises are connected by a technological chain. This type of holding is widely used in the oil and gas industry, where the parent company is responsible for the production, transportation, processing and marketing of products;
- a conglomerate holding company that unites heterogeneous enterprises that are not related to the technological process. Each of the subsidiaries conducts its own business, in no way dependent on the other “daughters”.
Depending on the degree of mutual influence of companies, there are:
- a classic holding company in which the parent company controls subsidiaries by virtue of its predominant participation in their authorized capital. Subsidiaries, as a rule, do not own shares of the parent company, although this possibility cannot be absolutely excluded. In some cases, they have small stakes in the parent company;
- cross-holding, in which companies own controlling stakes in each other. This form of holding is typical for Japan, where the Bank owns a controlling stake in the company, and it has a controlling stake in the Bank. Thus, financial and industrial capital are being merged, which, on the one hand, facilitates the company’s access to financial resources available to the Bank, and on the other hand, gives banks the opportunity to fully control the activities of subsidiaries by providing them with loans.