Conglomerate Definition Example Essay

Conglomerate: The specimen shown is about two inches (five centimeters) across. It is made up of chert and limestone clasts bound in a matrix of sand and clay.

What is Conglomerate?

Conglomerate is a clastic sedimentary rock that contains large (greater than two millimeters in diameter) rounded clasts. The space between the clasts is generally filled with smaller particles and/or a calcite or quartz cement that binds the rock together.

Conglomerate Close-Up: A detailed view of conglomerate showing the pebble-size clasts with sand and smaller size particles filling the spaces between them. The largest pebbles in this view are about ten millimeters across. Image by the United States Geological Survey.

What is the Composition of Conglomerate?

Conglomerate can have a variety of compositions. As a clastic sedimentary rock, it can contain clasts of any rock material or weathering product that is washed downstream or down current. The rounded clasts of conglomerate can be mineral particles such as quartz or feldspar, or they can be sedimentary, metamorphic, or igneous rock fragments. Clasts of quartzite, sandstone, limestone, granite, basalt, and gneiss are especially common. The matrix that binds the large clasts together can be a mixture of sand, mud, and chemical cement.

Conglomerate-Forming Environment: A beach where strong waves have deposited rounded, cobble-size rocks. If buried and lithified, these materials might be transformed into a conglomerate. Image copyright iStockphoto / Jason van der Valk.

Conglomerate-Size Sediment Clasts: Pebble-size clasts of many compositions deposited together on a beach. Quartz, sandstone, and limestone clasts are all easily recognizable. Largest clast is about two inches (five centimeters) across. Image copyright iStockphoto / Ivan Ivanov.

How Does Conglomerate Form?

Conglomerate forms where sediments of rounded clasts at least two millimeters in diameter accumulate. It takes a strong water current to transport and produce a rounded shape on particles this large. So the environment of deposition might be along a swiftly flowing stream or a beach with strong waves. These conditions might only be met during times of extreme flow or wave action. However, it is during these times that much of the Earth's sediments are moved and deposited.

To form a conglomerate, there must also be a source of large-size sediment particles somewhere up current. The rounded shape of the clasts reveals that they were tumbled for some distance by running water or moving waves. These conditions are found in streams and standing water bodies in many parts of the Earth.

Conglomerates often begin when a sediment consisting mainly of pebble- and cobble-size clasts is being deposited. The finer-size sand and clay, which fill the spaces between the larger clasts, is often deposited later on top of the large clasts and then sifts down between them to fill the interstitial spaces. After compaction, the deposition of a chemical cement then binds the sediment into a rock.

Martian Conglomerate: This image was acquired by NASA's Curiosity rover on the surface of Mars. It shows an outcrop of conglomerate and some pebble-size weathering debris. The round pebbles are too large to have been moved and shaped by wind, thus they had to have been transported a significant distance by water. This photo from September 2012 was the strongest evidence of the existence of water on Mars that had been obtained at that time.

Martian Conglomerate?

In September 2012, NASA's Mars rover Curiosity discovered an outcrop of conglomerate exposed on the surface of Mars. The rounded clasts within the conglomerate provide evidence that a stream or a beach had moved the rocks and tumbled them into rounded pebbles. This conglomerate is one of the most convincing evidences that water once flowed on the surface of Mars. (See the accompanying photo.)

Red Conglomerate: This photograph shows a portion of a dimension stone slab that was cut from a red conglomerate. The conglomerate is composed of well-rounded clasts of quartz and sedimentary rocks of various sizes and kinds along with a fine-grained matrix. To work well as a dimension stone, this conglomerate would have to be bound tightly with a very competent cement. This material would make spectacular wall panels, flooring tiles, stair treads, and other architectural elements. Image copyright iStockphoto / Violetastock.

Rock & Mineral Kits: Get a rock, mineral, or fossil kit to learn more about Earth materials. The best way to learn about rocks is to have specimens available for testing and examination.

What is Conglomerate Used For?

Conglomerate has very few commercial uses. Its inability to break cleanly makes it a poor candidate for dimension stone, and its variable composition makes it a rock of unreliable physical strength and durability.

Conglomerate can be crushed to make a fine aggregate that can be used where a low-performance material is suitable. Many conglomerates are colorful and attractive rocks, but they are only rarely used as an ornamental stone for interior use.

Analysis of conglomerate can sometimes be used as a prospecting tool. For example, most diamond deposits are hosted in kimberlite. If a conglomerate contains clasts of kimberlite, then the source of that kimberlite must be somewhere upstream.

In rare instances, conglomerate can be a "fossil placer deposit" containing gold, diamonds, or other valuable minerals. These conglomerates are mined, crushed, and processed as ores.

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What is a 'Conglomerate'

A conglomerate is a corporation that is made up of a number of different, seemingly unrelated businesses. In a conglomerate, one company owns a controlling stake in a number of smaller companies, which conduct business separately. Each of a conglomerate's subsidiary businesses runs independently of the other business divisions, but the subsidiaries' management reports to senior management at the parent company.

The largest conglomerates diversify business risk by participating in a number of different markets, although some conglomerates elect to participate in a single industry – for example, mining.

BREAKING DOWN 'Conglomerate'

A conglomerate benefits and struggles depending on the issue of size. 

For the management team of a conglomerate, having a wide array of companies in different industries can be real boon for their bottom line. Poorly performing companies or industries can be offset by other sectors. By participating in a number of unrelated businesses, the parent corporation is able to reduce costs by using fewer resources, and by diversifying business interests, the risks inherent in operating in a single market are mitigated.

In addition, companies owned by conglomerates have access to internal capital markets, enabling more ability to grow as a company. A conglomerate can allocate capital for one of their companies if external capital markets aren’t offering as kind terms the company wants.

However, the size of conglomerates actually hurts the value of their stock, a phenomena called conglomerate discount. The sum of the value of the companies held by a conglomerate tends to be more than the value of the conglomerates stock by anywhere between 13 to 15%. History has shown that conglomerates can become so diversified and complicated that they are too difficult to manage efficiently. Since the height of their popularity in the period between the 1960s and the 1980s, many conglomerates have reduced the number of businesses under their management to a few choice subsidiaries through divestiture and spinoffs.

The combination of a handful of different issues relating to financial transparency and management makes it so conglomerate stock is valued at a discount.

Layers of management add to the overhead of their businesses, and depending on how wide-ranging a conglomerates interests are, management’s attention can be drawn thin. The financial health of a conglomerate is difficult to discern by investors, analysts, and regulators because the numbers are usually announced in a group, making it hard to discern the performance of any individual company held by a conglomerate. For instance, media conglomerate IAC’s (which owns Investopedia) Form 8k from 2014 revealed the earnings, losses, depreciation, and amortization of intangible assets of their different segments, but not from their specific companies. As with most company acquisitions, there is always the risk friction developing because of differences in company culture, and innovation can stagnate.

Well Known Conglomerates

Warren Buffet’s Berkshire Hathaway, a conglomerate that has successfully managed companies involved in everything from plane manufacturing to real estate, is widely respected. Berkshire Hathaway owns majority stake in over fifty companies, and had minority holdings in companies ranging from Wal-Mart to car manufacturers, yet only has an office of 24 people. Buffet’s approach to management of companies in Berkshire Hathaway’s owns is to manage capital allocation and allow companies near total discretion when it comes to managing the operations of their own business.

Originally founded by Thomas Edison, General Electric has grown to own companies working in energy, real estate, finance, and healthcare, previously owning majority stake in NBC. The company is made up of specific arms that are independent in their operation but are all interlinked. This makes it so research and development on specific technologies can be applied to a broader range of products.

Conglomerates in the 1960s

Conglomerates were popular in the 1960s and initially overvalued by the market. Low interest rates at the time made it so leveraged buyouts were easier for managers of big companies to justify because the money came relatively cheap. As long as company profits were more than the interest needing to be paid on loans, the conglomerate could be ensured an ROI. 

Banks and capital markets were willing to lend companies money for these buyouts because they were generally seen as safe investments. All of this optimism kept stock prices high and allowed companies to guarantee loans. The glow wore off of big conglomerates as interest rates were adjusted as a response to steadily rising inflation that ended up peaking in 1980. It became clear that companies weren’t necessarily improving performance after they were purchased, which disproved the popularly held idea that companies would become more efficient after purchase.  In response to falling profits, the majority of conglomerates began divesting from companies they bought. Few companies continued on as anything more than a shell company.

Foreign Conglomerates

Conglomerate companies take on slightly different forms in different countries. 

Japan’s form of conglomerate is called the Keiretsu where companies own small shares in one another companies, and centered around a core bank. This business structure is in some ways a defensive one, protecting companies from wild rises and falls in stock market, and hostile takeovers. Mitsubishi is a good example of a company that is engaged in a Keiretsu model.

Korea’s corollary when it comes to conglomerates is called Chaebol, a type of family owned company where the position of president is inherited by family members, who ultimately have more control over the company than shareholders or members of the board. Well known Chaebol companies include Samsung, Hyundai, and LG.

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