What is an Amalgamation?
The process of merging two or more entities into a single, new entity is called amalgamation. This usually occurs in business when two or more organisations combine to form a single, bigger organisation. The objectives are to increase operational effectiveness, forge synergies, and build a more resilient and competitive company. An amalgamation is the merger of two or more companies into a completely new company. Amalgamations differ from purchases in that none of the companies involved in the transaction remain legal entities. Instead, a new corporation is formed by combining the prior companies’ assets and liabilities. The phrase amalgamation has mainly fallen out of use in the United States, being replaced with terms such as merger or consolidation, with which it is equivalent. However, it is still widely used in certain countries, such as India.
Geeky Takeaways:
- When two or more businesses merge their assets and debts to form a new one, this is called amalgamation.
- This is not the same as a purchase or takeover because none of the companies involved are still around.
- Combining businesses can help them get more cash, have less competition, and pay less in taxes, among other things.
- It can, however, cause a monopoly if too much competition is taken away, put the new company in too much debt, and put some workers out of work.
Table of Content
- What is an Amalgamation?
- How do Amalgamations Work?
- What is the Legal Process of Amalgamation?
- The objective of an Amalgamation
- Types of Amalgamation
- Pros of Amalgamations
- Cons of Amalgamations
- Examples of Amalgamation
- Methods of Accounting for Amalgamation
- Amalgamation vs. Acquisition
- Frequently Asked Questions (FAQs)