HoldCo (holding company)

Definition

An entity owning one or more operating businesses under it.

Why It Matters

It is useful vocabulary for where a search can go once there is more than one company to own, but usually premature structure for a first purchase. Most first-time buyers acquire in a single operating entity and add a holding company only when a second acquisition or an investor structure actually calls for one.

In numbers: A buyer's holdco owns three companies: a $700k-SDE plumbing shop bought in year one, a sister shop tucked in two years later, and the payroll company both share; each subsidiary borrows on its own, the holdco consolidates the equity.