Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Conglomerate”
A conglomerate is a corporation formed by the acquisition by one firm of several others, each of which is engaged in an activity that generally differs from that of the original. The management of such a corporation may wish to diversify its field of operations for a number of reasons: making additional use of existing plant facilities, improving its marketing position with a broader range of products, or decreasing the inherent risk in depending on the demand for a single product. There may also be financial advantages to be gained from the reorganization of other companies.
In the late 19th century many American conglomerates, such as the Standard Oil Company and Trust, sought to control all aspects relating to the development, production, marketing, and delivery of their products. Responding to criticisms of the apparent monopolies enjoyed by such companies, the U.S. Congress enacted antitrust legislation with the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act in 1914.
A strategy of diversification spurred the formation of many conglomerates in the mid-20th century, especially as firms sought to acquire unrelated companies whose products and services might better withstand economic slowdowns.

By Barry Norman, Investors Trading Academy

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