Why invest in a holding company
Affiliates / Holdings
A holding company is a company whose main business activity consists in acquiring stakes in other, independent companies. These can be held for a long time or sold again after a while and is not tied to any legal form, but is considered a way of organizing several companies together in a certain way.
In an investment company in the true sense of the word, the focus is on equity participation as a shareholder in order to invest in selected companies with a minority stake in a profit-oriented manner.
In contrast, a holding company acquires a majority stake in companies (over 50%), which enables them to take over operational management of the companies involved. For example, managers can be exchanged after the acquisition.
What types of holdings / affiliates are there?
Since there are different intentions with the establishment of a holding company, a distinction is made between this type of company according to its main business activity.
In the case of an operational holding company, the parent company is directly active in the market. The establishment or acquisition of subsidiaries serves to supplement or support, e.g. B. Foreign branches. The subsidiaries are therefore in the standard case significantly smaller than the parent company and depend on it strategically, structurally and in terms of personnel. The corporate headquarters exerts a very strong influence on the subsidiaries.
Management holding (also: strategy holding)
The management holding company does not have its own operational business, but it controls and plans the strategy of the subsidiaries. For this purpose, management positions are typically filled by the subsidiaries (e.g. CEO) and the capital flows within the corporate group are controlled by the strategy holding company. The advantage of this type of holding is its flexibility, as each subsidiary develops strategies for its own operational business. It combines the market proximity and flexibility of small and medium-sized enterprises (SMEs) with the capital strength and market presence of large companies.
Financial holding (also asset holding)
In contrast to an operational holding company, a financial holding company mainly manages the assets of the entire group and exercises neither operational nor strategic management in its subsidiaries. It is limited to a distanced exertion of influence over certain control bodies, such as shareholders' meetings or supervisory board mandates. The priority is to optimize earnings and value for the group as a whole or for individual investments.
If the financial holding reduces its entrepreneurial influence to such an extent that only very few staff are required, one speaks of an investment company or asset management company without group status.
The organizational holding is placed within companies and is used for the internal structuring and organization of individual company areas. They are also known as structural holdings.
For private investors, investment companies - in whatever form - can be interesting because they invest in a portfolio of several companies. Many of these companies are not listed and as an investor it is often the only way to be indirectly invested.
However, an investment in investment companies or holdings is only recommended as an admixture. In contrast to funds or ETFs, private investors acquire individual shares from these companies, which, at least in theory, can also end in bankruptcy.
A warning signal could be if the last new investment was made many years ago and the investment company cannot show any increases in sales or profits.
Berkshire Hathaway (ISIN: US0846707026)
This multi-billion dollar company, with celebrity chairman Warren Buffett, is a private equity firm that has acquired majority stakes in a number of companies, with a focus on insurance.
On the other hand, there are minority holdings in some prominent corporations, in which there is no interference in the operations of a company. These include: American Express, Coca Cola, IBM, Munich Re, Procter & Gamble, Wal-Mart, Washington Post
Blackstone Group L.P.(ISIN: US09253U1088)
The Blackstone Group is a publicly listed US investment company headquartered in New York. There are investments in, among others, Deutsche Telekom, the hotel chain Hilton, Legoland and The Weather Channel. On the other hand, the Chinese sovereign wealth fund China Investment Corporation (CIC) secured shares in Blackstone at an early stage. Blackstone currently has decent profitability for investors and a dividend yield of well over 6.0%.
KKR & Co. L.P. (ISIN: US48248M1027)
KKR & Co. L.P. (Kohlberg Kravis Roberts & Co.) is a large investment company headquartered in New York. There are investments in Wüttembergische Metallwarenfabrik AG, Toys "R" Us, Inc., Pioneer, Panasonic and Scout24 Switzerland, among others. In addition to a relatively cheap valuation, a more than 7.5% dividend yield and high dividend growth in the double-digit percentage range in recent years are attractive.
INDUS Holding AG (ISIN: DE0006200108).
The holding company invests in medium-sized production companies, whereby the focus here is on acquiring the majority of the companies. The core sectors of the investment portfolio include the construction industry, infrastructure, mechanical engineering, vehicle components, metal processing and medical technology. The latter sector in particular is to be increased. The interesting thing here is the acquisition of exclusively so-called hidden champions who are active in interesting niche markets and are leaders within their respective markets. The subsidiaries operate independently and are responsible for the areas of production, sales and administration as well as research and development. The holding company focuses on the functions of financing, controlling, accounting, taxes and legal.
There is a detailed company analysis from Indus Holding.
GESCO AG (ISIN: DE000A1K0201)
This holding company acquires medium-sized industrial companies, with a focus on the tool / mechanical engineering and plastics technology business area. The company basically acquires 100% of the company shares from the previous owner and replaces the respective managing director. Coaching, controlling and consulting are provided for the subsidiaries.
Deutsche Beteiligungs AG (ISIN: DE000A1TNUT7)
Deutsche Beteiligungs AG (DBAG) is one of the leading German investment companies in that it provides equity directly and through parallel funds for viable group subsidiaries and medium-sized companies. For the most part, the private equity company acquires the majority of the shares (management buy-out (MBO)), but in some cases only a minority stake is made to finance growth. The aim of an engagement is to increase the company's value. The group is limited to companies based in German-speaking countries, but which do operate internationally. The holding period is between three and ten years. In addition to a basic dividend of EUR 0.4 per share, which has remained unchanged in recent years, shareholders participate in successful financial years through a special dividend.
MBB Industries AG (ISIN: DE000A0ETBQ4)
MBB Industries AG is a family-run group that has been concentrating on acquisition and management of investments since the mid-1990s. MBB usually dares to get involved with unsolved successions, financing and earnings problems as well as partial sales within the group, and in doing so takes majority stakes.
The portfolio currently (2013) includes the group companies OBO Werke, Delignit, Hanke Tissue Spolka, DTS IT, CT Formpolster and MBB Fertigungstechnik. The operative business is subdivided into the three segments "Industrial Production", "Trade & Services" and "Technical Applications".
Society's commitment goes through three stages. First, after the takeover, cost-saving potentials that can be quickly realized are identified. Then the focus is on promising business areas, the other areas are sold or closed.
In the second step, the management of the acquired company is assisted by a managing director from MBB who has many years of experience. The participation can definitely be long-term, with the aim of buying up competitors or expanding the range of offers.
In the third phase, ongoing business is monitored and further optimized.
Aurelius AG(ISIN: DE000A0JK2A8)
As a holding company, Aurelius AG specializes in investments in companies that have unregulated corporate succession and significant operational problems. The outsourcing of subsidiaries or parts of companies is also of interest to this private equity company. The company's activities range from acquisitions to restructuring and reorganization to the sale of investments. For the future it is planned to buy companies with a sales volume between 30 and 750 million euros, whereby this financial investor has specialized in restructuring cases.
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