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There are several reasons why a company would choose to operate a wholly owned
subsidiary, rather than simply absorb the acquired company into the central corporate
operation. One of the most common reasons is a matter of location. The wholly-owned
subsidiary may physically reside in a different country from the holding company. When
this is the case, there may be compelling financial and regulatory factors that make it
much more financially sound to allow the company to continue more or less
autonomously.
Another common reason for the operating the wholly-owned subsidiary separately from
the owner company could be name value. Often, a well-known and respected corporation
is acquired by another entity that has no name recognition in that particular market.
Rather than spend huge amounts of time and resources to create a reputation, the holding
company will simply decide to remain in the background. This allows the wholly-owned
subsidiary to continue to enjoy the current name recognition and market share, while
being able to work with the resources of the parent company to find ways to enhance that
reputation.