Capital Restructuring
Meaning Of Amalgamation
When two or more companies carrying on similar business go into liquidation and a new company is formed to take over their business, it is called amalgamation. In other words, amalgamation refers to the formation of a new company by taking over the business of two or more existing companies doing similar type of business. In amalgamation, two or more companies are liquidated and a new company is formed to take over the business of liquidating companies. The companies which go into liquidation are called vendor or amalgamating companies where as the new company which is formed to take over the business of liquidating companies is called purchasing or amalgamated or transferee company. The main aim of amalgamation is to minimize the possibility of cut-throat competition and to secure the advantages of large scale production.
Features Of Amalgamation
* Two or more existing companies are liquidated.
* A new company is formed to take over the business of liquidating companies.
* The nature of business of existing companies is similar.
* Liquidating companies are called vendor companies and the new company is called purchasing company.
* Generally, the issue of equity shares of purchasing company discharges purchase consideration.
Advantages of Amalgamation
1. Operating economics
Operating economics means expenses associated with business and its allied activities. These expenses are required to carry on day-to-day activities of the business. These generally include fixed cost and variable cost.
When companies amalgamate, their business operation expands. Such expansion helps them to use and manage the economies of large-scale production and distribution.
Under operating economies: 1. Amalgamated companies optimally utilize their production and distribution capacity. 2. They also manage to reduce operating cost, management cost, personnel cost, etc.
Hence, based on above discussion, we can say that, amalgamation
When two or more companies carrying on similar business go into liquidation and a new company is formed to take over their business, it is called amalgamation. In other words, amalgamation refers to the formation of a new company by taking over the business of two or more existing companies doing similar type of business. In amalgamation, two or more companies are liquidated and a new company is formed to take over the business of liquidating companies. The companies which go into liquidation are called vendor or amalgamating companies where as the new company which is formed to take over the business of liquidating companies is called purchasing or amalgamated or transferee company. The main aim of amalgamation is to minimize the possibility of cut-throat competition and to secure the advantages of large scale production.
Features Of Amalgamation
* Two or more existing companies are liquidated.
* A new company is formed to take over the business of liquidating companies.
* The nature of business of existing companies is similar.
* Liquidating companies are called vendor companies and the new company is called purchasing company.
* Generally, the issue of equity shares of purchasing company discharges purchase consideration.
Advantages of Amalgamation
1. Operating economics
Operating economics means expenses associated with business and its allied activities. These expenses are required to carry on day-to-day activities of the business. These generally include fixed cost and variable cost.
When companies amalgamate, their business operation expands. Such expansion helps them to use and manage the economies of large-scale production and distribution.
Under operating economies: 1. Amalgamated companies optimally utilize their production and distribution capacity. 2. They also manage to reduce operating cost, management cost, personnel cost, etc.
Hence, based on above discussion, we can say that, amalgamation