difference between merger and amalgamation

Understanding the Differences between Merger and Amalgamation

When companies plan to expand or grow, they might consider merging or amalgamating with another company. Although the two terms seem similar and are often used interchangeably, there are significant differences between the two. In this article, we’ll highlight the distinctions between merger and amalgamation.

What is a Merger?

A merger involves two or more companies that decide to combine their operations into a single entity. In this case, the involved companies may merge all their assets, stocks, and personnel into the new company. The new corporation will be distinct from each of the original corporations that were merged, and it will typically have a new name.

In most cases, mergers occur when two companies that operate in the same industry or have complementary operations decide to join forces. The goal of a merger is usually to achieve synergies and economies of scales. The new entity typically has a higher market share, increased financial resources and can benefit from shared expertise.

What is an Amalgamation?

Amalgamation involves two or more companies combining their operations into a single entity. The difference between amalgamation and merger is that the amalgamated entity is a new legal entity formed out of the merger of the two or more companies. Amalgamation is also known as a ‘fusion,’ ‘consolidation,’ or ‘integration.’

The involved companies typically pool their stocks, assets, and personnel to create a new company that is different from any of the constituent companies. In amalgamation, the original companies cease to exist and become a part of a new entity. As a result, amalgamation requires the approval of all parties involved, including shareholders and regulatory authorities.

The Key Differences

The primary distinction between merger and amalgamation is that in a merger, the involved companies remain distinct legal entities, each maintaining their operations and ownership structure. On the other hand, in an amalgamation, the original companies cease to exist, and a new entity is created out of the merger.

Additionally, in a merger, all the merging companies’ assets, stocks, and personnel are merged, and the new entity typically has a new name. In contrast, in an amalgamation, only the assets, stocks, and personnel of the amalgamating companies are combined to form a new entity.

Conclusion

Both merger and amalgamation are strategies used by companies to grow and improve their operations. However, they are different, and understanding these differences is crucial when deciding on the best strategy to use. Careful consideration of the objectives, legal and regulatory requirements, and the specific circumstances of each case are essential to determine the most appropriate approach.

Table difference between merger and amalgamation