Difference Between Merger vs Amalgamation
Inorganic growth has become a major part of the business looking to become industry leaders and companies are nowadays acquiring smaller fish or taking control of a new line of business in order to enter the market and earn some big fat returns. Merger and amalgamation are two terms that are frequently used in the world of takeovers to grow the business and fetch returns in the market. In this Merger vs Amalgamation article, we will try and understand the key differences between Merger and Amalgamation in detail.
Head To Head Comparison Between Merger vs Amalgamation (Infographics)
Below is the top 5 difference between Merger vs Amalgamation
Key Differences Between Merger vs Amalgamation
Both Mergers vs Amalgamation are popular choices in the market; let us discuss some of the major differences:
- A merger happens when two companies or more companies who have a similar line of business operations decide to merge into each other in order to get synergies out of the business or to enter a whole new different geography or start a new service line. On the other hand, Amalgamation usually happens when a larger entity of the business having bigger operations in the market acquires smaller companies which much less revenue and operations.
- A merger can be horizontal, vertical, or conglomerate. A horizontal merger takes place in order to reduce the existing competition in the market which eliminates companies of a similar nature. A vertical merger is when a company that is providing raw material and other things to the business gets acquired which is also known as backward integration. Forward integration happens when a company that is a vendor to the business gets acquired. A conglomerate merger is entered into with the goal of diversifying the business. On the contrary, amalgamation can be in the nature of a merger or in the nature of the purchase. When amalgamation happens in the nature of purchase when the shareholder acquires of the acquirer company takeover all the shareholding of the acquired company and the company ceases to exist This means the shareholders of the transferor entity no longer have a proportionate share in the combined equity of the parties to the amalgamation, where when amalgamation happens in the nature of merger both entities assets and liabilities of the companies are combined
- Amalgamation is less frequent in events when compared with mergers. Amalgamation creates some powerful companies around the globe. The world’s largest steel company Arcelor was created through an amalgamation. On the other hand, mergers also kill competition in an industry, and before merging entities the companies need to take approval from the merger control in India
- In a Merger both the entities that are merged cease to exist and a new company is formed all together with a new shareholding pattern, the new name, and new goals. On the other hand, under amalgamation, the acquiring company retains all his powers and rights of the shareholding and the company which has been acquired is dissolved
- Examples of Merger and Amalgamation
- Merger = “Centurion bank of Punjab” is merging with “HDFC bank”
- Amalgamation = Nirma and core health care
Merger vs Amalgamation Comparison Table
Below is the 5 topmost comparison between Merger vs Amalgamation
|
Merger |
Amalgamation |
There are three types of Merger: –
|
There are two types of Amalgamation: –
|
| The merger gives rise to a new entity and a totally completely new company is formed under a merger | Under Amalgamation, the acquiring company retains its total identity while the company which is being acquired is dissolved and cease to exist |
| The initiative to merge is generally taken by an acquirer who is willing to merge | The initiative to acquire is usually taken by both the entities combined together |
| The controlling stake under a merger can be mutually agreed and discussed between the two parties | The controlling stake by the company is always with the acquirer and the target company is a minority shareholder in it |
| Legal formalities in the case of a merger is more when compared to amalgamation | Legal formalities in the case of an Amalgamation is less when compared to a Merger |
Conclusion
Both merger vs amalgamation is a source of inorganic growth in the industry which makes it an effective tool to achieve rapid growth for businesses. Companies today should formulate strategies and policies on who to acquire and how to cleverly enter new markets in the world. Mergers and amalgamations should be aligned with the long-term goals of the company. Distressed assets should be carefully analyzed before being bought out.
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