Mergers and Amalgamation | Meaning | Differences

Merger - Meaning and Differences

Image: Merger – Meaning and Differences

What are Mergers?

According to Prof. L.H.Haney, merger is, “a form of business organization which is established by the outright purchase of the properties of constituents, organizations and the merging or amalgamating of such properties into a single business unit”.

In a merger, one business unit acquires the other business unit. The acquiring company retains its entity while the acquired loses its entity.

Examples of Mergers

  • Acquisition of Modern Foods, Kissan, Tata Oil Mills Co., Ltd (TOMCO), Kwality Walls etc., by Hindustan Level Limited(HLL).
  • Acquisition of ANZ Grindlays Indian operations by Standard Chartered, Times Bank by HDFC Bank, Bank of Madura by ICICI Bank,
  • Acquisition of Voltas and Allwyn by Electrolux. Subsequently Electrolux’s – Indian operations were acquired by Videocon International.
  • Recent international mergers include – acquisition of Gillette by P&G, Betapharma by Ranbaxy, IBM’s PC division by Lenovo, Compaq by Hewlett Packard(HP) etc.

What is Amalgamation?

In Amalgamation, two or more companies combine to create a new company. All the combining companies lose their separate existence and entity. The new company takes over all existing assets and liabilities of the companies amalgamated. The new company allots its shares to the shareholders of the amalgamating companies.

Example of Amalgamation

For e.g. Arcelor, the world’s largest steel company (which has been since been acquired by Mittal Steel) came into being as a result of amalgamation. French steel company Usinor amalgamated with Aceralia of Spain and Arbed of Luxembourg in the year 2002 and the new company formed out of this amalgamation was named as Arcelor.

Differences between Merger & Amalgamation

Though mergers and amalgamations are form of complete consolidation there are certain differences between them. They are given in the following table:

 

The above table sums up some of the differences between mergers and amalgamation.

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