- [Nicole] Hello, everyone. So this lesson is going to be looking at mapping company ownership. So the aims of this section are we're going to get a basic understanding of the role of parent, holding, and subsidiary companies. We're going to be exploring kind of what those are and we're going to learn how to find the ultimate owner or owners of a company and a company group, which is very, very useful if you're researching a company. 

So just a little recap on the last video. So just to remind you that companies are their own legal entity distinct from the people who run them, and this protects them from things like bad debts or other accountability issues. And they can be owned by shareholders, or members, or partners, depending on the structure. And shareholders can also be companies and not just individuals. And we'll explore that a little more in the accounting module, like how to read company accounts. But in a company group, there can be parent companies, holding companies, and subsidiary companies. 

So what is a parent company? So this graphic is kind of more about brands than it is specifically about companies. But I think it's like a really nice graphic illustrating how company groups may look. So for example, P&G, Proctor and Gamble, they've got all these kinds of key brands. Pringles, they've got Iams, they've got Febreeze. Like you can see all these different brands. But I don't know from this graphic, obviously, if those brands are their own companies or just collection of brands under the same company groups. But it's kind of interesting to understand that most, not most companies, but a lot of companies will have a parent. So they'll have someone kind of operating behind the scenes, potentially, or maybe not, but they're the parent, they kind of own that company. So yeah, like I said, companies are often part of a bigger group, which means that finding out who owns a company can sometimes be a little bit challenging. Like for example, here, that looks like a bit of a minefield, right? About how do you go from this guy, to understanding that Mars owns it, for example. So yeah, it can be a bit fiddly. 

A parent company is a single company that has a controlling interest in another company. So this means like over 50% of the voting stock, giving it control of its operations. So they could be hands-off. So they might be filthy rich and own a bunch of companies, and lots of other people manage them, or they could be hands-on, so they could be kind of actively running those companies. But either way, they will always have control. And that's like really important to understand. And parent companies have to account for the subsidiaries appropriately in their financial statements, which is why it's important to kind of move through the hierarchy and understand like who's at the top. 

So a subsidiary is a company owned or controlled by another company. So they're owned by their parent company or a holding company, which we'll talk about now. So if your a parent company was your parent, your mum or dad, your subsidiary might be the kid, for example. Nice corporate family tree, but a subsidiary. Yeah, so the system protects assets of various properties from each other's liabilities. A parent company might have a whole bunch of companies that it owns, but those companies might have their own debt. And so, yeah, they're kind of at every turn reducing their responsibility and the risk that they're carrying. So a holding company is a company that holds the controlling stock in other companies. So they don't tend to conduct like business operations, so making and selling things, but they might have oversight. So they might kind of have control over decisions. And a holding company can also be a parent company. And it's important to note that holding companies are protected from losses accrued by subsidiaries. So if a subsidiary goes bankrupt, so if something happens to the kid, its creditors can't go after the holding company. So that's, again, like this is how corporations work in terms of getting away with loads of stuff. 

So why do they build groups? Why do they make these families? So there's different reasons. One of them is vertical integration, this is kind of coined in corporate speak. So this is when a company owns or controls its suppliers, distributors, or retail locations to control its value or supply chain. So that, again, might sound like gobbledygook. But for example, that might look like a big industrial food company buying potato farms, for example. So it's kind of like trying to have control at every opportunity to like optimise its profits. Or for example, like Bayer buying Monsanto and having if like Monsanto were a supplier to Bayer, then that would be convenient for them. Sometimes it's not black and white as to whether something is vertical or horizontal. Like lots of companies are similar. But it's just kind of interesting to understand this stuff. 

So horizontal integration. This is the acquisition of a business operating at the same level in the same industry. So kind of like taking out your competition basically. So for example, that might be a media company buying out another media company. So that looks like, for example, Facebook buying Instagram. And there's like regulation in place around mergers and companies joining and stuff, so that power doesn't consolidate just in one big company. But this happens all the time across different industries, as one acquiring another to have greater access to the same industry. And then a conglomerate is a corporation made up of a number of different and sometimes unrelated businesses. So it might just be a billionaire that just thinks, okay, this is profitable, this is profitable. Oh, I'll have a bit of retail. Oh, I'll have a bit of property. Like they're kind of seemingly unconnected in the same industry, but they're still made up of like a kind of family of businesses. So yeah, short answer of why do companies build groups? To make money, and to be more profitable, and to have kind of more power and control over their market areas. 

So how do we find out the parent company? So one step is there is software that exists that can help you map out company ownership already. So there's a really amazing, super, super useful database called FAME. So it is expensive. I've got no idea how much it costs, but we access it via our university login. And you can also access it via a library. And this is the website here. So you can look at that in your own time. But yeah, it's really kind of fast and simple way of finding out how to find a parent company. So for example, I got asked by some folks in Ireland to research this company, Dalradian Gold, who are a gold mining company. And they wanted to find out who the ultimate owners were of that company. So we looked them up on FAME and you can see here the whole company group. So they're actually owned by a Canadian company called Dalradian Resources Incorporated. And they're actually owned by Orion Mine Finance Group. So that's the kind of big daddy at the top. That's the parent company here. And when you're kind of just targeting like one company, that company, for example, Dalradian, they might say like, "Oh we've got "a really brilliant track record "and we've never left anywhere polluted "and blah, blah, blah, blah." But what you can do by looking at this company group is you can call them out on that basically. So Dalradian Resources also own Minco Limited, who own all these other mining companies, some of which have got hideous like histories of like environmental pollution, and like health impacts on workers, and all other sorts of stuff. So it's really useful to understand like a kind of corporate structure, and kind of map out who's in that like corporate family. Okay. Yeah, so that was very easy. 

Shortcut is to use something like FAME. But it's also really important to know how to do this manually, to know where you can find out that parent company. So we're going to be doing this in a second together. I'm going to work through an example with you. I'm going to introduce how to use Companies House and then we're going to go through a case study together. But what is useful about doing it manually is it can kind of reveal more interesting information to you. It means that you kind of end up seeing different accounts from different subsidiaries or holding companies. And then that's like a very interesting exercise of potentially finding more dirt. So all you're going to need is access to the Companies House website and a blank piece of paper. And we're going to go through that together. So I'm just going to describe it briefly now and then I'm going to create a separate video, and we're going to go through that together. 

So you want to find the company on Companies House. You want to download the most recent annual accounts. You want to go to the very kind of like back of the accounts where there's a section called notes to the financial statements, and there should be a little sentence saying who the ultimate parent company is. And then yeah, you can kind of repeat that step if you need to. If the final ultimate company hasn't been listed, you might need to just keep going up the chain. And yeah, we're going to go through that in the example. We're going to look at the Banks Group coal mining company and I'm going to explain how to do it. But again, like with all of these lessons, practise, practise, practise. So maybe watch the video and then maybe try doing it yourself. The company that you're researching, take a look at their accounts and see what you can find. And see if you can find the ultimate owner. And ideally, see if you can start to map out that company itself with a little diagram of who the holding companies are and stuff. Okay, great.