Holdco, or holding company, is a type of company that owns, controls, and manages other businesses and investments. In order for a company to be considered a holdco, it must exercise effective control and ownership of at least one other company. This means that the holdco owns enough of another firm's voting shares that it maintains a majority of voting rights at the firm.

Holdcos are an efficient way for companies to acquire other firms without directly purchasing them outright or engaging in a merger or consolidation. Rather, they may acquire a controlling stake in the other company and place it under the control of the holdco.

Holdcos help larger companies manage their assets more effectively. Instead of having to handle every single venture the company may engage in, the holdco acts as an umbrella corporation to finance, handle, and manage the separate businesses. This simplifies the process by consolidating all of the management decisions into one entity.

Holdcos provide benefits beyond the consolidation of management control. Holding companies can also be used to limit the liability as well as decrease taxation. By maintaining separate companies under its umbrella, the holdco is able to optimize the use of its investments in terms of taxation, eliminating areas of possible double taxation.

In short, holdcos are important tools for companies that wish to acquire other firms and manage their investments more effectively. The holdco allows the company to leverage its investments in a more tax-efficient and cost-effective manner. Additionally, a holdco eliminates many of the legal complications that come with a merger or consolidation.