Amalgamation vs. Merger

Difference Between Amalgamation and Merger

In the field of corporate, amalgamation and mergers are generally used terms. Two companies combine together their assets with a view to have more chances of growth and to have better reach to new markets base. Both amalgamation and merger result in the formation of a larger company having more assets and customers. Let us discuss the technical differences in the terms.

Amalgamation and mergers are intended to have the potential to grow. Amalgamation, merger, acquisitions are the common words in corporate world. Dictionary defines the terms amalgamation and merger as the act in which two or more business entities are combined to form a new one. Thus their definitions are same.

One or more two entities are combined in merger. It is a process in which the identity of one or more entities is lost or covered by the shadow of the other. In other words, a company takes over another company. The process of Amalgamation involves blending of two or more business entities losing their original identities and forming a new one. When companies merge, the assets and liabilities of a company merge with the assets and liabilities of another one. The shareholders of the merged company become the shareholders of the larger company resulted by merger. In amalgamation, a completely new company comes into existence and shareholders of both companies are given the shares of the new company.

Merger is of three type such as horizontal merger, vertical merger and conglomeration. Horizontal merger reduces competition by eliminating a company in the market. In vertical merger one company is the supplier of resources and other services to another company. This type of merger is helpful for manufacturing companies. In such merger, an uninterrupted supply of raw material is available all the time. Conglomerate mergers are intended to diversification of corporate activities and to have more goodwill in the market.

Amalgamations and mergers are commonplace practices in the field of business. They are intended to have growth and diversification.  However, these practices are criticized as one company eliminates the other. But all amalgamations and mergers are not bad in nature. There may be a reduction of cost in the production and services to be useful for the consumers.

 

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