How is a conglomerate different from a federation of companies?
A conglomerate has divisions, and its stock price represents the value streams of all those businesses. A federation of companies, like M&M, has investments in separate businesses. Each company focuses on a different industry although they have a common owner. The distinction is important because there are two components of focus, managerial and financial. In 1994, when I restructured the group into sectors, I provided managerial focus to all our businesses. Dedicated teams of managers have run our businesses since then. I kicked myself upstairs to make sure the structure would work; otherwise, I’d be breathing down the presidents’ necks every day, defeating the idea of managerial focus. I believe that business families should behave like aggressive private equity companies. They must allocate capital, demand performance, create synergies, sustain value systems, and implement good governance practices, but they should let professional managers run the companies. Several M&M senior exec
