Amalgamation of Companies: Types, Advantages, and Disadvantages
Amalgamation of companies involves combining two or more entities to form a new company. This process can result in benefits such as increased capital, reduced costs, and improved research facilities. However, it may also lead to market monopolies and challenges in management. Two main types of amalgamation are discussed, along with examples and the pros and cons associated with this business practice.
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Presentation Transcript
AMALGAMATION OF AMALGAMATION OF COMPANIES COMPANIES - II BBA
MEANING OF AMALGAMATION: The combination of one or more companies into a new entity. During amalgamation, two or more companies willingly come together to cooperate with each other and diversify their business activities. Thus amalgamation results in the formation of a new company which has a unique name, logo, identity and existance.
EXAMPLES: Maruti motors operating in India and Suzuki based in Japan amalgamated to form a new company called Maruti Suzuki Limited. Tata sons operating in India AIA Group based in Hong kong amalgamated to form a new company called Tata AIG life insurance.
TYPES OF AMALGAMATION: According to accounting standard-14 (AS-14) there is two types of amalgamation. Amalgamation in the nature of merger. Amalgamation in the nature of purchase.
ADVANTAGES: Amount of capital can be increased by combining business. Establishment and management cost can be reduced. Benefit of large scale production can be secured. Research and development facilities are increased. Avoiding competitions.
DISADVANTAGES: Business combination brings monopoly in the market, which may be harmful for the society. The identity of the old company finishes. Goodwill of the old company is decreased. Management of the companies becomes difficult.
