{"id":2208,"date":"2021-02-12T05:47:35","date_gmt":"2021-02-12T05:47:35","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=2208"},"modified":"2021-02-12T05:47:37","modified_gmt":"2021-02-12T05:47:37","slug":"difference-between-merger-and-amalgamation-in-india","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/","title":{"rendered":"Difference between Merger and Amalgamation in India"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Merger and\nAmalgamation are two terms which are quite frequently used in takeovers of\nbusiness to grow and make returns in the market. The deals in merger and\namalgamation are increasing day by day. Amalgamation means where one business\nentity acquires one or more business entities to form a new one. Whereas,\nMerger means the consolidation of two or more companies to form one single joint\nentity having new management structure and business ownership where both the\ncompanies come together to merger together as a one unit with a new name to\ngain the benefits and synergies in operations. This article will discuss about\nthe difference between <strong><a href=\"https:\/\/swaritadvisors.com\/merger-and-amalgamation\" class=\"text-primary\">merger and\namalgamation in India<\/a><\/strong>.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2ce1a3e30c2\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2ce1a3e30c2\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Understanding_Amalgamation_of_Companies_in_India\" title=\"Understanding\nAmalgamation of Companies in India\">Understanding\nAmalgamation of Companies in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Understanding_Merger_of_Companies_in_India\" title=\"Understanding\nMerger of Companies in India\">Understanding\nMerger of Companies in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Difference_between_Merger_and_Amalgamation\" title=\"Difference\nbetween Merger and Amalgamation\">Difference\nbetween Merger and Amalgamation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Why_do_Companies_Prefer_Amalgamation_and_Merger\" title=\"Why do Companies Prefer\nAmalgamation and Merger?\">Why do Companies Prefer\nAmalgamation and Merger?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Types_of_Merger_and_Amalgamation_in_India\" title=\"Types of Merger and Amalgamation in India\">Types of Merger and Amalgamation in India<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Types_of_Merger\" title=\"Types of Merger\">Types of Merger<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Horizontal_Merger\" title=\"Horizontal\nMerger\">Horizontal\nMerger<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Vertical_Merger\" title=\"Vertical Merger\">Vertical Merger<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Conglomerate_Mergers\" title=\"Conglomerate\nMergers\">Conglomerate\nMergers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Co-_Centric_Merger\" title=\"Co- Centric\nMerger\">Co- Centric\nMerger<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Reserve_Mergers\" title=\"Reserve Mergers\">Reserve Mergers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Cash_Mergers\" title=\"Cash Mergers\">Cash Mergers<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Forward_Merger\" title=\"Forward Merger\">Forward Merger<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Types_of_Amalgamation\" title=\"Types of\nAmalgamation\">Types of\nAmalgamation<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Amalgamation_in_the_nature_of_Merger\" title=\"Amalgamation in\nthe nature of Merger\">Amalgamation in\nthe nature of Merger<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Amalgamation_in_the_Nature_of_Purchase\" title=\"Amalgamation in\nthe Nature of Purchase\">Amalgamation in\nthe Nature of Purchase<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/swaritadvisors.com\/blog\/difference-between-merger-and-amalgamation-in-india\/#Conclusion\" title=\"Conclusion \">Conclusion <\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Understanding_Amalgamation_of_Companies_in_India\"><\/span>Understanding\nAmalgamation of Companies in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Amalgamation of\ncompanies occurs when two or more companies combine and create a new one from\nit. Amalgamation happens between one large company and several smaller or less\nfinancially stable companies.<\/p>\n\n\n\n<p>Amalgamation is\na strategy adopted by the company for various purposes such as:<\/p>\n\n\n\n<ul><li>To expand the business.<\/li><li>Gaining advantage in the competition.<\/li><li>Enhancing the efficiency of the companies by\namalgamating\/ combining into one.<\/li><li>Economies of large scale production.<\/li><\/ul>\n\n\n\n<p><strong>For example:<\/strong> Maruti Motors in India and Suzuki based in Japan amalgamated to form a new company Maruti Suzuki (Idia) Limited.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/the-financial-impact-of-merger-and-amalgamation-on-banking-sector\/\">The Financial Impact of Merger and Amalgamation on Banking Sector<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Understanding_Merger_of_Companies_in_India\"><\/span>Understanding\nMerger of Companies in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A merger of the\ncompanies means the absorption of one company by another company. The companies\nin merger are in the same line or industry and want to grow or diversify their\nofferings. All the assets and liabilities of the company that is merged belong\nto the company in which it is merged.&nbsp;\nThe reasons why the companies merge are:<\/p>\n\n\n\n<ul><li>To remove trade barriers.<\/li><li>Taking away the competition and create a strong\ncompany.<\/li><li>Combining the resources of the companies.<\/li><\/ul>\n\n\n\n<p><strong>For example:<\/strong> Reliance Industries and\nFlag Telecom group.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Difference_between_Merger_and_Amalgamation\"><\/span>Difference\nbetween Merger and Amalgamation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"wp-block-table\"><tbody><tr><td>\n  &nbsp;\n  <\/td><td>\n  Merger\n  <\/td><td>\n  Amalgamation\n  <\/td><\/tr><tr><td>\n  Meaning\n  <\/td><td>\n  Similar line of businesses merges for gaining\n  advantages and synergy.\n  <\/td><td>\n  Amalgamation generally happens when bigger company\n  acquires smaller ones.\n  <\/td><\/tr><tr><td>\n  Type\n  <\/td><td>\n  Horizontal, Vertical, Reverse and Co- generic.\n  <\/td><td>\n  Nature of Purchase of Nature of Merger.\n  <\/td><\/tr><tr><td>\n  Retaining Identity\n  <\/td><td>\n  The acquiring company may retain its identity.\n  <\/td><td>\n  The acquiring company retains its identity and\n  small company losses. \n  <\/td><\/tr><tr><td>\n  Initiative\n  <\/td><td>\n  Initiative to merge is generally taken by the\n  acquiring company.\n  <\/td><td>\n  Both the companies take initiative to amalgamate. \n  <\/td><\/tr><tr><td>\n  Controlling Stake\n  <\/td><td>\n  The controlling stake can be mutually agreed and\n  discussed between the 2 parties under merger.\n  <\/td><td>\n  The controlling stake is with the acquirer and the\n  target company is a minority shareholder in it.\n  <\/td><\/tr><tr><td>\n  Legal Formalities\n  <\/td><td>\n  Legal formalities are comparatively more.\n  <\/td><td>\n  Legal formalities are comparatively less as\n  compared to merger.\n  <\/td><\/tr><tr><td>\n  Assets and Liabilities\n  <\/td><td>\n  The existing company keeps its assets and\n  liabilities and also takes up the assets and liabilities of the other\n  company.\n  <\/td><td>\n  Assets and liabilities of amalgamating companies\n  transfer to a new entity.\n  <\/td><\/tr><tr><td>\n  Transfer of Assets and Liabilities\n  <\/td><td>\n  Assets and liabilities are consolidated in merged\n  company.\n  <\/td><td>\n  Assets and liabilities get transferred to balance\n  sheet of new company.\n  <\/td><\/tr><tr><td>\n  Size of the Company\n  <\/td><td>\n  Companies are bigger in size and operations.\n  <\/td><td>\n  Target companies are typically smaller size.\n  <\/td><\/tr><\/tbody><\/table>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_do_Companies_Prefer_Amalgamation_and_Merger\"><\/span>Why do Companies Prefer\nAmalgamation and Merger?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Companies prefer\nto amalgamate and merge due to following reasons:<\/p>\n\n\n\n<ul><li>Diversifying into multiple industries without a\nneed to start afresh.<\/li><li>To achieve the objective economies of scale for\ncost optimization, effective utilization of resources, access to a larger\nmarket and etc.<\/li><li>To achieve synergy in operations by targeting\ncompanies in the similar product line or industry. <\/li><li>To achieve growth in less time.<\/li><li>To get advantage in taxation by combining a\nprofit making company with loss making company, thereby reducing the tax liabilities.<\/li><li>To reduce the competition in specific industry\nby combining the two entities together.<\/li><li>To utilize the financial resources effectively\nand achieve effective financial planning with an entity having bigger balance\nsheet.<\/li><li>To increase control over the value chain in a\nparticular industry by way of backward integration and forward integration.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Merger_and_Amalgamation_in_India\"><\/span>Types of Merger and Amalgamation in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/infographic-without-heading.png\" alt=\"Types of Merger and Amalgamation\" class=\"wp-image-2210\" width=\"308\" height=\"446\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/infographic-without-heading.png 692w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/infographic-without-heading-208x300.png 208w\" sizes=\"(max-width: 308px) 100vw, 308px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Merger\"><\/span>Types of Merger<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Horizontal_Merger\"><\/span>Horizontal\nMerger<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>It takes place\nbetween the companies having similar line of business of similar products. The\npurpose of merger is to acquire an advantageous position in the market, reduce\ncompetition and expand its reach in the market. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Vertical_Merger\"><\/span>Vertical Merger<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>It is the\ncombining of two companies dealing in similar type of products however, the\nstage of product at which they are operating are not similar. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conglomerate_Mergers\"><\/span>Conglomerate\nMergers<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When a merger is\ndone between two or more unrelated industries or companies, it is known as\nconglomerate merger. The objective of both the companies are absolutely\ndifferent from one another however, the main purpose behind this type of merger\nis to encourage business in terms of profits, operations and size. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Co-_Centric_Merger\"><\/span>Co- Centric\nMerger<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Under this type\nof merger, the organizations serve to the same type of customers. Under this,\neven if the products and services are completely different of both the\ncompanies, still it complements each other.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reserve_Mergers\"><\/span>Reserve Mergers<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Under this type\nof merger, the company decides to merge with its suppliers. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cash_Mergers\"><\/span>Cash Mergers<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Cash mergers\nmeans where the shareholders are offered cash instead of shares of the newly\nformed company. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Forward_Merger\"><\/span>Forward Merger<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When a company\nopts to merge with its customers, it is known as forward merger. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Amalgamation\"><\/span>Types of\nAmalgamation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Amalgamation_in_the_nature_of_Merger\"><\/span>Amalgamation in\nthe nature of Merger<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When the transferor and the transferee company decide to combine their <a href=\"https:\/\/en.wikipedia.org\/wiki\/Shareholder\">shareholders<\/a> interest along with the assets and liabilities of the company, it is termed as Amalgamation in the Nature of Merger. The alterations are made in the book values of the liabilities and assets. Also the shareholder of the transferor company tends to become the shareholder of the transferee company by 90% of the shareholding. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Amalgamation_in_the_Nature_of_Purchase\"><\/span>Amalgamation in\nthe Nature of Purchase<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>When the\nconditions do not meet for the amalgamation in the nature of merger, the same\nis referred as amalgamation in the nature of purchase. In this, a transferor\ncompany acquires a transferee company and there is no proportionate\nshareholding of the shareholders of the transferee company in the amalgamated\ncompany. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Merger and Amalgamation in India are both useful for the companies to grow and expand its business operations in the market. Amalgamations are possibly mergers but it does not necessarily means that all mergers are amalgamations. The company can opt either of the two depending upon its nature, objective, business environment and structure of the business.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/start-up-companies-into-the-scheme-of-merger-and-amalgamation\/\">MCA Allows the Entry of Start-up Companies into the Scheme of Merger and Amalgamation<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Merger and Amalgamation are two terms which are quite frequently used in takeovers of business to grow and make returns in the market. The deals in merger and amalgamation are increasing day by day. Amalgamation means where one business entity acquires one or more business entities to form a new one. Whereas, Merger means the [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":2209,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[342,64],"tags":[371],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2208"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=2208"}],"version-history":[{"count":4,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2208\/revisions"}],"predecessor-version":[{"id":2214,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2208\/revisions\/2214"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/2209"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=2208"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=2208"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=2208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}