A merger unites two or more businesses to form a new organization. A merger and an amalgamation are not the same thing because neither business exists as a separate legal entity. Instead, a brand-new organization is created to hold the merged assets and obligations of the two businesses.
Even when a new company is formed, the term amalgamation has typically lost favor in the United States and been replaced with merger or consolidation. But nations like India continue to utilize it frequently. In contrast to a regular merger, this one results in the death of both companies involved.
The weaker transferee company absorbs the stronger transferor company, creating a new entity with more assets and a larger client base.
Combinations can boost financial resources, drive out rivals, and reduce tax liabilities for businesses.
However, if too much competition is eliminated, the workforce is reduced, and the debt load of the new business increases, it could result in a monopoly. Amalgamations often involve two or more businesses operating in the same industry or with some operational overlap. Businesses may merge in order to diversify their operations or increase the scope of their services.
An amalgamation creates a larger company because two or more businesses are joining forces. The weaker transferor company gets absorbed by the more powerful transferee company, creating an altogether new corporation. As a result, the newly established organization gains a larger and stronger customer base as well as more assets.
Usually, larger and smaller entities merge, with the larger one taking over the smaller businesses.