What is an Amalgamation

Amalgamation or a merger is a route of business transfer whereby the assets of two companies become vested in one company (which may or may not be one of the original two companies).

Amalgamation typically happens between two or more companies engaged in the same line of business or those that share some similarity in operations.

Companies may combine to diversify their activities or to expand their range of services.

Consequently, the amalgamating companies lose their individual existence and their shareholders become the shareholders of the new or amalgamated company.

Usually this happens as a part of internal restructuring where group companies are merged into the holding entity to reduce the administrative and compliance burden.

The term amalgamation has generally fallen out of popular use in the United States, being replaced with the terms merger or consolidation even when a new entity is formed. But it is still commonly used in countries such as India.

Since, two or more companies are merging together, an amalgamation results in the formation of a larger entity.

The transferor company—the weaker company—is absorbed into the stronger transferee company, thus forming an entirely different company.

This leads to a stronger and larger customer base, and also means the newly formed entity has more assets.

 

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