Types of Amalgamation
There are two main types of amalgamation: amalgamation like merger, and amalgamation like purchase.
1. Amalgamation in the Nature of Merger: This type involves the merger of two or more companies to form a new entity. In this scenario, the merging companies combine their assets, liabilities, and operations to create a single, new entity. Each of the merging companies stops existing as a separate legal entity, and instead, a new entity is formed to continue the business activities of all the merging entities. The shareholders of the merging companies usually become shareholders of the new entity in proportion to their ownership in the original companies. Amalgamation in the nature of a merger often happens when companies want to merge their strengths, resources, and market positions to achieve common goals, such as expanding into new markets or improving operational efficiencies.
2. Amalgamation in the Nature of Purchase: In this type, one company (the purchasing company) acquires the assets and liabilities of another company (the target company). Unlike amalgamation in the nature of a merger, the target company doesn’t cease to exist as a separate legal entity. Instead, it becomes a subsidiary or division of the purchasing company. The purchasing company takes control over the assets and liabilities of the target company, often through buying shares or assets. Amalgamation in the nature of purchase is common when a company wants to increase its market share, gain access to specific assets or technologies, or eliminate competition by acquiring rival companies.