KALYAN CITY LIFE

Sharing Wisdom and Vivid Memories of Life

About

Kalyan City is a fast emerging residential township in the Thane district of Maharashtra state, India. It is a central suburban town and resides 54 kms north-east of Mumbai. This blog regularly shares quality academic materials. Here we also document our unique experiences and vivid memories of life. Read our lucid informative articles to excel your understanding, knowledge and success.

Team

Articles published on Kalyan City Life blog are inspired from our work experience, field research, study of various good books and papers, seminars and consultations from subject scholars. Our unique collection of useful study notes is an outcome of a team effort and hard work of Gaurav Akrani, Prof. Mudit Katyani and Manoj Patil.

yin yang

What is Amalgamation? Definition, Meaning and Example



square Definition of Amalgamation


In general, the definition of amalgamation can be stated as follows.

"Amalgamation is a union of two or more companies, made with an intention to form a new company."

In terms of finance, the definition of amalgamation can be given as under.

"Amalgamation is an agreement (deal) between two or more companies to consolidate (strengthen) their business activities by establishing a new company having a separate legal existence."

definition and meaning of amalgamation

Image credits © Brad Ross.


square Meaning of Amalgamation


Before we proceed to know, What is Amalgamation? First let's understand the meaning of two terms viz., 'amalgamating companies' and 'amalgamated company'. The meaning of these terms is as follows:

  1. Amalgamating companies are those two or more companies which willingly unite (combine) to carry on their business activities jointly.
  2. Amalgamated company is a newly formed union (alliance) of two or more amalgamating companies. It has a separate legal existence with a new unique name.

Now let's discuss the meaning of amalgamation with some examples.

To amalgamate means to unite or combine or blend. It is an act or process in which two or more things fuse together to form a new potent thing.

Amalgamation is an emerging trend of today's business world. It results in the formation of a new, strong, stable and large company. It also results in the growth and expansion of this newly formed company.

During amalgamation, two or more companies willingly come together to cooperate with each other and diversify (expand) their business activities.

After amalgamation, two or more companies dissolve (disintegrate) and lose their individual legal status (existence), hence they no longer exist anymore. However, they again re-establish themselves, but now jointly, by forming a new company having a unique name.

Thus, amalgamation results in the formation of a new (separate) company which has a unique name, logo, identity and existence.

The management of amalgamated company is led (directed) by members of two or more companies getting amalgamated.


square Example of Amalgamation


Consider the example of amalgamation shown in the following diagram.

example of amalgamation

In the above example, Company 'A' and Company 'B' are operating (existing) in the market. Company 'A' is one amalgamating company while Company 'B' is another amalgamating company. Company 'A' and Company 'B' are getting amalgamated to form a new (separate) Company named 'AB'.

In this example of amalgamation, Company 'A' and Company 'B' will surrender all their equity shares (ownership shares) to the newly formed Amalgamated Company 'AB'. The assets and liabilities of Amalgamating Companies 'A' and 'B' will be transferred to Company 'AB'. The shareholders of the Company 'A' and Company 'B' will be given the shares of Company 'AB'. The amalgamating companies 'A' and 'B' will lose their individual existence (identity) and continue to operate jointly under the name of Company 'AB'.

Two good examples of amalgamations are as follows:

  1. Maruti Motors operating in India and Suzuki based in Japan amalgamated to form a new company called Maruti Suzuki (India) Limited.
  2. Tata Sons operating in India and AIA Group based in Hong Kong amalgamated to form a new company called TATA AIG Life Insurance.




squareRelated



squareTranslation



FlagsFrance flagGermany flagItaly flagBrazil flagSpain flagJapan flagIndia flagChina flagRussia flagdefault

11 Comments :

  1. Anonymous said...

    Is Amalgamation same as a Joint venture?

  2. Gaurav Akrani said...

    Amalgamation and Joint venture are not same.

    1. Amalgamation always results in formation of a new company whereas Joint venture does not result in formation of a new-company.

    2. Amalgamation is formed with an intention of continuing business operations over an indefinite period. In contrary, joint venture is formed with an intention of continuing business operations over a definite period.

  3. Anonymous said...

    Amalgamation is the act of bringing two or more companies together, to form a company in order to strengthen their business.

  4. Anonymous said...

    If two companies come together to form an amalgamation, which company will be the one with the controlling power?

  5. Gaurav Akrani said...

    Amalgamation is an agreement between two or more companies to consolidate their business activities by establishing a new company which will be having a separate legal existence.

    So there is nothing like having a controlling power of any one company.

  6. pavan said...

    can u explain merger vs amalgamation?

  7. Gaurav Akrani said...

    Dear Pavan,

    Merger is a union of two or more business entities. It is a method in which the identity of one or more business entities is lost.

    Amalgamation is a unification (coming together) of two or more business entities. In this method, both business entities (e.g. companies) lose their identities, and a new separate entity (e.g. a new company) is formed.

  8. Anonymous said...

    What is the difference between AMALGAMATION, ABSORBTION AND RECONSTRUCTION?

  9. Gaurav Akrani said...

    In Amalgamation, two or more companies are liquidated (i.e. winded up). In the process of Amalgamation, a new company is formed.

    In Absorption, one or more companies are liquidated. In the process of Absorption, no new company is formed and an existing company takeover (absorbs) other liquidated companies.

    In Reconstruction, there is a transfer of a company's business to a new company. The existing company may or may not be liquidated. The shareholders of an existing-company will get shares of equivalent value (amount) in the new company. This requires an approval of the court.

  10. Anonymous said...

    What is the basic difference between the amalgamation, merger and purchase consideration rply fast

  11. Gaurav Akrani said...

    In Amalgamation, two or more companies are liquidated. Here, a new company is formed.

    In Merger, one or more companies are liquidated. Here, no new company is formed.

    Purchase consideration is the total money paid to complete (carry out) the amalgamation and merger process.

Please Comment



 
Scroll Top