By Martin Fridson

The term“ conglomerate” is commonly applied to a wide variety of large corporations that are dominant in their industries. For example, in 2024 the Daily Express US described automaker General Motors as a conglomerate. And a 2025 Wall Street Journal article referred to“ the breakfastcereal conglomerate WK Kellogg.”

Merriam-Webster, however, specifies that a company must be“ widely diversified” to qualify as a conglomerate. Currently, just two companies in the S & P 500 are classified as industrial conglomerates— 3M and Honeywell— the latter of which is in the process of splitting itself into three single-industry companies as this article heads to publication. With so few companies fitting the category, Standard & Poor’ s discontinued its Conglomerate subindex after 2001.

In their heyday in the 1950s and the 1960s, though, conglomerates included some of the best known and most controversial American companies. The controversy arose from their voracious appetite for acquisitions. Gulf & Western was satirized as Engulf & Devour in Mel Brooks’ s 1976 film Silent Movie. ITT became, in the words of the late business historian Robert Sobel, the“ chief villain of American business” when it was revealed that the company played a role in the overthrow of Salvador Allende’ s leftwing government in Chile.

The anxiety generated by conglomerates was tied to merger mania, which has troubled the public every time it has appeared on the financial scene. In 1964, there were 91 mergers of companies with $ 10 million or more of assets; 68 % of them involved conglomerates. Just five years later, the number of such mergers had more than doubled to 192, of which 84 % involved conglomerates.

Further contributing to the moral indignation surrounding conglomerates was the fact that they were mostly led by outsiders from the business establishment of the day. Many were Jews or Catholics and they came from the South or Far West, not traditional breeding grounds for corporate CEOs in those years.

Companies

Prominent conglomerates during the 1950s and 1960s included Litton Industries, Textron and Ling-Temco-Vought. Later, companies such as ITT, General Electric, United Technologies, W. R. Grace and Martin Marietta carried on the conglomerate banner.

The conglomerates typically began as single-industry companies. For example, Royal Little’ s Textron started as a yarn producer in 1923 and later diversified into a variety of manufacturing businesses. After building up a sizable auto parts company, Gulf & Western’ s Charlie Bluhdorn yearned to get into something more glamorous. To that end, he acquired the Paramount movie studio and later added Desilu Studios. This enabled him to saunter around Hollywood with a starlet on his arm, making decisions about film productions and casts.

The Financial Angle

Conglomerates were known not only for the breadth of their operations, but also for their aggressive financial reporting practices. Capitalizing on the high price-earnings( P / E) multiple at which its stock traded, a conglomerate would use its shares as currency to acquire a low P / E company. The conglomerate might purchase a lower-growth or less-profitable company, but the immediate effect of the acquisition was that the conglomerate’ s earnings-per-share( EPS) rose. In a virtuous( or otherwise) circle, high EPS growth ensured that the market would continue to assign the conglomerate a high multiple.

The financial rationale for conglomerates was not only growing EPS but also a belief that the stock market would reward steady EPS growth. The idea was that by combining businesses that by their nature reached their peak and trough earnings at different points in the business cycle, a conglomerate would receive a higher P / E multiple than the individual companies could obtain on their own. Additionally, the allocation of capital would be centrally controlled, with the largest portions going to the highest-return businesses.

Fans of the conglomerates stated this proposition as“ 2 + 2 = 5.” That is, the whole was supposed to be worth more than the sum of its parts. Conglomerates also had their detractors, however. They pointed out that they could diversify their stock portfolios on their own, without paying a premium for a company’ s stock to do it for them.

There were some instances in which a conglomerate acquired a moribund company and actually improved its operations. Those represented genuinely positive contributions to US economic performance. The biggest part of the story, however, was financial engineering.

At Gulf & Western, Bluhdorn stumbled upon a new twist. In the mid-60s,

24 FINANCIAL HISTORY | Winter 2026 | www. MoAF. org