Meaning of Merger, Amalgamation, Acquisition and Merger Types
Meaning of Merger A merger refers to a combination of two or more companies, usually of not greatly disparate size, into one company. A merger involves the mutual decision of two companies to combine and become one entity; it can be seen as a decision made by two "equals". Merger refers to a situation when two or more existing firms combine together and form a new entity. Merger is a marriage between two companies of roughly same size. It is thus a combination of two or more companies in which one company survives n its own name and the other ceases to exist as a legal entity.
Types of MergerHORIZONTAL MERGER- Horizontal mergers take place where the two merging companies both produce similar product in the same industry.VERTICAL MERGER- Vertical mergers occur when two firms, each working at different stages in the production of the same good, combine.CONGLOMERATE MERGER- Conglomerate mergers take place when the two firms operate in different industries.
Meaning of Amalgamation Amalgamation signifies the transfers of all are some part of assets and liabilities of one or more than one existing company or two or more companies to a new company. According to Halsbury’s law of England amalgamation is the blending of two or more existing companies into one undertaking, the shareholder of each blending companies becoming substantially the shareholders of company which will carry on blended undertaking. There may be amalgamation by transfer of one or more undertaking to a new company or transfer of one or more undertaking to an existing company.
Meaning of Acquisition Acquisition refers to the acquiring of ownership right in the property and asset without any combination of companies. Thus in acquisition two or more companies may remain independent, separate legal entity, but there may be change in control of companies. Acquisition results when one company purchase the controlling interest in the share capital of another existing company in any of the following ways: a)controlling interest in the other company. By entering into an agreement with a person or persons holding b)By subscribing new shares being issued by the other company. c)By purchasing shares of the other company at a stock exchange, and d)By making an offer to buy the shares of other company, to the existing shareholders of that company.