Definition, Meaning and Examples of Amalgamation

Definition, Meaning and Examples of Amalgamation

If you are searching for Definition, Meaning and Examples of Amalgamation then you are a right place. We will here understand Definition, meaning, requirement, process, And examples of Amalgamation here. You will find the amalgamation word in most of Business Newspaper.

The Word Amalgamation is very common in the corporate world. The simple meaning of Amalgamation is a process by which two or more companies join with each other and create a new large one. The Banking sector companies most of time do amalgamation instead of Take over.

If you are from India, then mega merger of PSU Banks was done in 2021. You can find Complete List of Merger of Banks in India 2022 here. The Amalgamation process was happened with 10 Indian PSU Banks.

In this article, we will try to cover below listed topics,

1. What is Amalgamation?
2. Definition of Amalgamation
3. Meaning of Amalgamation
4. Need For Amalgamation
5. Examples of Amalgamation

Definition Of Amalgamation

In general terms, Amalgamation is process by which two or more companies join with each other and create a new large one. In terms of finance, the definition of amalgamation can be given as under.

“Amalgamation is an agreement (deal) between two or more companies to consolidate (strengthen) their business activities by establishing a new company having a separate legal existence.”

In accounting an amalgamation, refers to the combination of financial statements.  Example: The group of companies releases their combined financial statements for a better picture of the organization. But after some time, only one financial result will be published.

In India, for the development of Rural Banking, RRBs were amalgamated with each other. Due to new regulation, the number of RRBs were decreased.

Few things to remember that,

• It is different from a merger.
• A new company or firm is created with the help of both an organization/company.
• We can refer to it as an agreement between two or more firms to create a new large one. It is a business strategy for survival.
• Example: two firms are in the same business. But due to some business environment disturbing events, both are forced to liquidate. In this situation, Both rival firms can join hands with each other and form a new business entity.
• Amalgamation is used to get tax benefits, tax benefits, economies of scale, increase in capital, elimination of competition.

Meaning Of Amalgamation

In layman’s language, Amalgamation is process in which two or more companies come to form a union. Amalgamation is the act of bringing two or more companies together, to form a company in order to strengthen their business. Which will help them to sustain in the business line.

Amalgamation means to survive in a new business environment, two or more firms come with each other to form a new firm. This will eliminate both firms in the business but they have control of new firm. It will lead both firms for new hope. There may be mutual understanding between both companies management.

Amalgamation is an agreement between two or more companies to consolidate their business activities by establishing a new company that will be having a separate legal existence.

As the above illustration, Company A and Company B are working in the same business. In the amalgamation process, they form a new Company AB.

 

Every business lives with the possibility of the threat of amalgamation with a competitor”

Need of Amalgamation

In the world of digitalization, the corporate industries are feeling change of atmosphere in short duration. Sometime, the change create unstably of the business. The unstable business atmosphere force companies to change the way of business. The companies need to acquire / merge other company OR  amalgamation with other company for the survival.

• To form of a new, strong, stable and large company
• Business strategy for survival
• To grow in the market
• To get tax benefits amalgamation is done
• Large economies of scale are achieved by the process of amalgamation
• It eliminates competition between two firms and the formed new company compete better against other players.
• Synergy benefits can be availed
• New markets can be accessed
• Cost-cutting can be done after amalgamation
• Both companies come with their market, technology, clients so new firm becomes more stable and strong.

Here During amalgamation, two or more companies willingly come together to cooperate with each other and diversify (expand) their business activities.

There is no change in rights and duties of the company during and after amalgamation. The company has same rights and duties as it were previous to amalgamation.

Examples of Amalgamation

If you are news reader then you will find many examples of amalgamation in news within a week. We will try to understand topic via different examples of amalgamation. Company A And Company B are operating in the business line. Due to some reason, they decide to liquidate their business and form new company AB. In this situation Company A And Company B is Amalgamating companies while Company AB is Amalgamated company. It is Example of Amalgamation.

In these process valuation of both the Company A and Company B is done. Even Before and after process of Amalgamation is carried out. The legal process of forming new entity is done. The share is surrendered and after process of amalgamation, shares are transferred on the name of New Company AB.

Few Examples of Amalgamation are

• The Renault–Nissan–Mitsubishi Alliance is a French-Japanese strategic partnership between the automobile manufacturers Renault (based in Boulogne-Billancourt, France), Nissan (based in Yokohama, Japan) and Mitsubishi Motors (based in Tokyo, Japan).
  • The new alliance between three majors help them to control their market share as well as explore new market. It also eliminates unused resources.
  • Because of this alliance As of January 2018, the Alliance is now world’s leading plug-in electric vehicle manufacturing group, with global sales since 2010 of over 500,000 electric vehicles
  • Because of Renault-Nissan-Mitsubishi alliance they sold 1076 M cars in 2018. Now they are operating 122 plants worldwide. (2021)
• Starbuck India formed by Tata group and Starbuck.
• Jubilant FoodWorks Limited  is an Indian company based in Noida, Uttar Pradesh which holds the master franchise for Domino’s Pizza in India, Nepal, Sri Lanka and Bangladesh, and also for Dunkin’ Donuts in India. The company is a part of the Jubilant Bhartia Group
• Citicorp and Travelers Group : It is now one of the biggest mergers in the sector of financial services of banking, insurance and investment operations.

If you want to find more examples of amalgamation they search amalgamation word in search box. You will find many examples even in our website.

Conclusion

The process of Amalgamation create more strong organization which can compete more in business atmosphere. The Amalgamation process sometimes done because of change in rules in regulation. Like because change in RBI rules, RRBs were amalgamated in India. The examples of amalgamation will help our reader to understand more about amalgamation process.

If you find any error in Definition, Meaning and Examples of Amalgamation then comment below. The article was updated on 18-01-2023.