Investment Banking Tutorials
- Mergers and Acquisitions
- What is Mergers and Acquisitions?
- Mergers vs Acquisitions
- Acquisitions Examples
- Horizontal Merger
- Vertical Merger
- Synergy in M&A
- Successful Mergers and Acquisitions
- Financing Acquisitions
- Acquisition Premium (Takeover)
- Statutory Merger
- Joint Venture
- Advantages of Joint Venture
- Types of Joint Venture
- White Knight
- Hostile Takeover
- Golden Parachute
- Poison Pills
- Killer Bees Defense Strategy
- Show Stopper in M&A
- What is Amalgamation?
- Spin off vs Split Off
- Forward Integration
- Backward Integration
- Horizontal vs Vertical Integration
- What is Divesting / Divestiture?
- Bootstrap Effect
- PAC MAN Defense
- Flip-In Poison Pill
- Flip-Over Poison Pill
- Scorched Earth Defense Policy
- Tender Offer
- Friendly Takeover
- Amalgamation vs Merger
- Lobster Trap Defense
- Asset Purchase vs Stock Purchase
- Joint Venture vs Strategic Alliance
- Greenshoe Option
- Dawn Raid Takeovers
- Crown Jewels Defense
- Best Mergers and Acquisitions Books
- What is Asset Restructuring?
- Investment Banking Basics (44+)
- Investment Banking Careers (25+)
- Investment Banking Firms (27+)
- Top Banks (42+)
- Cryptocurrency Basics (10+)
Amalgamation vs Merger – Differences
What is Merger?
The merger is a process wherein two or more companies/entities are combined together to form either a new company or an existing company absorbing the other target companies. Basically, it’s a process to consolidate multiple businesses into one business entity.
Merger process may involve two possibilities in the above example:
- A new entity XYZ Corporation will be formed to house the asset and liabilities of existing entities. Hence survival of existing entities ABC Corp and PQR Corp cease to exist.
- ABC Corporation being relatively stronger entity absorbing PQR Corp, hence the resultant entity being the absorbing company i.e. ABC Corporation
What is Amalgamation?
Amalgamation is a type of merger process in which two or more companies combine their businesses to form an entirely new entity/company. Amalgamation is an appropriate arrangement wherein two or more companies operate in the same business thus Amalgamation helps in reduction in operational cost due to operational synergy.
ABC Corp and XYZ Corp will cease to exist after the Amalgamation process resulting in a new entity, JKL Corporation.
Amalgamation vs Merger Infographics
Here we provide you with the top 9 difference between Merger vs Amalgamation
Amalgamation vs Merger – Key Differences
The key differences between Amalgamation vs Merger are as follows –
- There is a very fine difference between Amalgamation vs Merger as both processes are a way to a consolidation of multiple companies
- Amalgamation is a type of consolidation processes used under a merger.
- Amalgamation results in the formation of an entirely new company. However, a merger is a consolidation process wherein resultant company may be a new company or may be an existing company
- Minimum two companies are involved in merger however minimum three companies are required for Amalgamation process
- Size of the companies involved in Amalgamation process are of comparable level, however, size of companies in merger process is a different size as an absorbing company is expected to be of relatively larger size than a size of an absorbed company
- Asset and liabilities of the existing entities in the Amalgamation process are transferred to an entirely new entity. However, Asset and Liabilities of the absorbed entity in the merger process are consolidated to absorbing entity.
- Shares of the absorbing company are given to shareholders of the absorbed company in the merger process. However, shares of the new entity formed in the process are given to the shareholders of the existing entities in the Amalgamation process.
Amalgamation vs Merger Head to Head Difference
Let’s now look at the head to head difference between Amalgamation vs Merger
|Basis- Merger vs Amalgamation||Merger||Amalgamation|
|Definition||Two or more companies are combined together to form either a new company or an existing company absorbing the other target companies. A merger is a process to consolidate multiple businesses into one business entity. All the Amalgamations are part of the Merger.||It is a type of merger process in which two or more companies combine together to form a new entity. All the mergers are not Amalgamation.|
|Number of Entities Required||Minimum 2 companies are required as one absorbing company will survive after absorbing the target company||Minimum 3 companies are required as an Amalgamation of two companies results in a new entity|
|Size of the Companies||In the merger process, the size of the absorbing company is relatively larger than the absorbing company.||In Amalgamation, the size of the target companies is comparable.|
|Resultant Entity||One of the existing company may absorb the target company for a merger, hence may retain its identity.||Existing companies lose their identity and a new company is formed.|
|Impact on Shareholders||Shareholders of the absorbing entity retain their ownership however shareholders of the absorbed entity gain ownership in the absorbing company.||All the shareholders in the existing entities become shareholders in the new entity.|
|Impact on Shares||Shares of the absorbing company are given to shareholders of the absorbed company.||Shares of the new entity formed in the process are given to the shareholders of the existing entities.|
|Driver for Consolidation||Mergers are mostly driven by the absorbing Company||Amalgamation process is initiated by both the companies interested in the Amalgamation process|
|Accounting Treatment||Asset and liabilities of the absorbed/acquired company is consolidating||Asset and liabilities of the existing entities are housed and transferred into the Balance sheet of the newly formed entity|
|Examples of Amalgamation vs Merger||Consolidation of two entities Tata Steel and UK based Corus Group with the resulting entity being Tata Steel. Corus Group lost its identity in the process.||Consolidation of two entities Mittal Steel and Arcelor resulting in the new entity named Arcelor Mittal. Both Mittal Steel and Arcelor Group lost their identity in the process.|
Why Companies go for Amalgamation and Merger?
- Diversification into multiple industries without going through hurdles of starting afresh
- To achieve the Economies of Scale for cost optimization, access to a larger market, effective utilization of resources etc.
- To achieve Operational Synergy by targeting companies in the same industry/similar product lines
- To achieve Growth targets in lesser time
- The advantage in Taxation by combining a loss-making company with a profit-making company thereby reducing the tax liabilities
- Reduced Competition in a specific industry by combining two entities
- To achieve Effective Financial Planning with a resultant entity having a bigger balance sheet and to utilize financial resources effectively
- Increased Control Over Value Chain in a specific industry by way of forward integration and backward integration
Amalgamation vs Merger – Conclusion
Amalgamation vs Merger both are processes of consolidation of two or more companies into a new entity or an existing entity absorbing the target entity. In the process, a resulting entity may be a new entity or it may be an existing entity. Amalgamation is a type of consolidation process under a merger. In the Amalgamation process, two company combines to form a new entity. Amalgamation and Merger process helps companies achieve their goals such as growth, increase in shareholders’ value, an increased economy of scale, synergy, access to larger market/new geographies, entry into new industry etc.
This has a been a guide to the Amalgamation vs Merger. Here we also top difference between Amalgamation and Merger along with infographics and comparison table. You may also have a look at the following articles –