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Unit 2: Amalgamation: Basics and their Concepts
Pavitar Parkash Singh, Lovely Professional University

unit 2: amalgamation: Basics and their concepts notes

contents

Objectives
Introduction
2.1 Amalgamation of Companies
2.1.1 Absorption of Companies
2.1.2 Types of Amalgamation
2.2 Difference between Amalgamation in Case of Merger and Purchase of Companies

2.2.1 Merits of Amalgamation
2.2.2 Demerits of Amalgamation
2.3 Important Technical Terminology Used in Acquisition of Business
2.4 Summary

2.5 Keywords
2.6 Review Questions
2.7 Further Readings

objectives

After studying this unit, you will be able to:

l z Define the term amalgamation of companies
l z Recognise the difference between amalgamation in case of merger and purchase of
companies

l z Describe the important technical terminology used in acquisition of business
introduction

The modern age is the age of competition and large-scale business. In order to derive the
economies of large scale production and to eliminate or reduce the competition, two or more
than two companies engaged in the similar nature of business, may combine their undertakings.
Combination of the undertakings reduces the duplication of expenditures, decreases the amount
of risk of competition and also reduces cost per unit of the production. Combination of the
companies may be in the form of Amalgamation, Absorption and Reconstruction of Companies.
Corporate restructuring in the form of amalgamations have become very popular in the economic
environment of the world. Amalgamations gained momentum in the Indian economy following
economic liberation in 1991. Earlier amalgamations were considered to be a hostile business
strategy, but today the Indian business house accepts its willingly as a measure to grow at an
accelerated pace. Amalgamations help in diversification of business. If a company wants to enter
into a new line of business, it will easier and economical to amalgamate with another company
that is already matured in the business rather than setting up the whole new venture from the
scratch.

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