This concept refers to that combination under which all companies involved retain their separate identities. However, the firm that initiates the process is known as holding company and taken over companies are referred to as subsidiary companies. The process can be explained by the following equation:
(A)+B+C = (A)+b+c
Where (A) = Holding company
b = the subsidiary company
c = the subsidiary company
The holding company (A) has upper hand over the subsidiary companies in management and decision making. The above equation shows that (A) has purchased B and C converting B into b and C into c.
The holding company purchases at least 51% shares of the taken over companies which are then know as subsidiary companies.
The objective of this type of combination may be expansion, wider product line, and improvement in business practices.