Amalgamation and Merger! Several successful and struggling business people dream of any one of these happening to their business. So, are you interested in knowing what all the hype is about? If that is the case, you are in the right spot, my dear friend!
In this article, you will get to know everything. This article, starting from information on the difference between merger and amalgamation, has it all. All you have to do is read the entire thing, and you should become a pro on the topic in no time.
Difference Between Merger and Amalgamation
Before we start going into the details, we want you to have an easy-to-understand summary of the topic. Our merger vs. amalgamation table contains all the information on the subject in brief. So, if you want a quick walkthrough of the article, this is the section you should look into.
|When numerous companies who hold the same line of business or offer the same service join together to improve the quality and quantity and add more variations to their business, it is called a merger
|If a more well-developed company that is more financially sound takes over a more inferior business, it is called amalgamation
|Conglomeration, vertical, and horizontal
|Amalgamation can be thought of as the combination of purchase and merger
|After the merger, a new, more powerful business entity is born
|The company that buys the business gains all the rights and gives the new business its name. However, the previous business loses its trace
|The initial shareholder of the different companies retains the new shares (and hence, become the shareholders) of the newly created firm
|The shareholder/shareholders of the attained company are newly added to the shareholders of the existing organization
What Is Merger?
After you are done with the table, it is time that we get more into the details. Do not worry; it is not complex at all! You see, a merger is total restructuring and conjunction of two or more business organizations.
In short, in a merger, two or more companies that hold the same interest and will provide financial aid, manufactural assistance, or anything to one another will combine. Here, the previous company or companies will no longer exist.
Instead, a more powerful and efficient firm will be produced with new views and goals. Now, if you are thinking about the shareholders, they remain the same. However, this time, shareholders of all the companies that are being merged are combined.
Now, a merger occurs in three types:
- A vertical merger is where one company offers its service as a manufacturer or raw materials provider, and the other takes over the supply command. Hence, a harmonious system is established.
- A horizontal merger occurs when several companies with the same service or product combine to reduce and tackle competition.
- Conglomerate merger allows you to diversify the company, allowing you to produce more variants of products or services.
What Is Amalgamation?
Now that we know everything about a merger, it is fair that we understand the concept of amalgamation better. Now, from the table, amalgamation might seem like a negative thing.
Nonetheless, we can assure you that this is not the case. You should know, many companies are drowning in loss or liability.
So, for them, amalgamation is a lifesaver. In this, a more powerful, well-developed, financially stable, and capable business firm takes over the organization.
The company that is attaining the business becomes in charge of the whole system and will combine the acquired business as its part.
And the previous shareholders or owner of the business is added to the new esteemed shareholders of the current organization. Anyways, amalgamation is of two types:
- Amalgamation in Nature
In this, the transferor no longer contains sufficient shares.
- Amalgamation in Purchase
In this, the transferor and acquirer share the assets and liabilities of the business.
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Key Differences Between the Two
If you have come this far, you should have a clear understanding of the two terms. Here, we shall be telling more about these in detail. By the end of this section, there should be no more confusion regarding the subject.
- A merger is the joining of one or more companies into a new and more well-equipped company. But in amalgamation, a much powerful and stable company takes hold of the more inferior business.
- In amalgamation, the shareholders are introduced and added to the company that bought the inferior business. Now, in a merger, a new shareholders group is created.
- The previous business is disbanded and dissolved in amalgamation, whereas a new business entity is created in a merger.
So, did you think that the difference between merger and amalgamation was this vast before reading this article? You did not, right? Well, it is very natural!
Both of these terms have a very similar operation, but the terms and conditions are completely different.
Hence, now, if a company comes by and asks about Amalgamation or Merger, you will be fully ready to decide what to do!