A holding company is a parent company that owns enough voting stock in a subsidiary to dictate policy and make management decisions. This is generally done through influence of the company's board of directors.
This doesn't mean that the holding company owns all of the subsidiary's stock, or even a majority of it. However, holding companies that control 80% or more of the subsidiary's voting stock gain the benefits of tax consolidation, which include tax-free dividends for the parent company and the ability to share operating losses.
Acquiring a controlling interest in a subsidiary as a holding company has certain advantages over a merger:
The holding company model has the following disadvantages: