A conglomerate is a collected heterogeneous mass or it can be a collection of companies operating in different fields under single ownership. In geology, it can mean a collection of pebbles and gravel cemented together.
In the 1960's big companies used to acquire companies that were profitable but unrelated to their business. The idea was to raise loans and buy companies that were profitable. This aggressive nature of a conglomerate made the investors believe that the conglomerate was powerful and a driving force in business. This in turn made the conglomerate's stock price rise and raising loans to buy more companies became easier.
Investors soon discovered that the growth of the companies remained the same or sometimes even fell. Soon, the companies that were recently purchased had to be sold off by the conglomerates. To remain profitable, today's companies have had to focus on core competency.
In the 1960's big companies used to acquire companies that were profitable but unrelated to their business. The idea was to raise loans and buy companies that were profitable. This aggressive nature of a conglomerate made the investors believe that the conglomerate was powerful and a driving force in business. This in turn made the conglomerate's stock price rise and raising loans to buy more companies became easier.
Investors soon discovered that the growth of the companies remained the same or sometimes even fell. Soon, the companies that were recently purchased had to be sold off by the conglomerates. To remain profitable, today's companies have had to focus on core competency.
