Conglomerate discount

Conglomerate discount is an economic term used to describe the situation where the combined value of several companies is less than the value of the companies when they are considered as separate entities. To give a simple example, imagine that you have two companies, Company A and Company B, and each is worth $1 million. Together, Company A and Company B might be worth only $1.8 million, so the conglomerate discount would be $0.2 million. This happens because when companies are combined, it can be hard to evaluate them accurately, and investors may feel that their combined value is riskier than when they are independent.