Conglomerate discount

A phenomenon observed on the stock market in which investors are prepared to pay less for nested companies than the fair value of the individual parts of the group (the fact that a conglomerate is worth less than the sum of its parts). – The reason for this is seen in the fact that – conglomerates generally operate uneconomically: the ratio of costs to performance is usually less favorable than in the case of an unaffiliated company; in other words, they are not “the best host” (there is a poor, a sub-optimal allocation of resources) and – group managements in particular are widely regarded by investors as water-headed entities (bloated machinery) that interfere with group companies to their detriment. – See bank mergers, decentralization principle, Gigabank, group levy, Octopus, cross-subsidization, subsidiarity principle.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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