Meaning of Amalgamation

Amalgamation is not just a corporate term; it's a magical process of blending businesses to create something new. Learn more about it.”
AGENDA
Meaning –
Amalgamation
Acquisition
External reconstruction
Differences between Amalgamation, Acquisition and External reconstruction

1. ACCOUNTING FOR BUSINESS COMBINATION - I “ Amalgamation is not just a corporate term; it's a magical process of blending businesses to create something new. Learn more about it .” hR by Dr. Panduranganagouda Honnali

2. AGENDA Meaning – Amalgamation Acquisition External reconstruction Differences between Amalgamation, Acquisition and External reconstruction hR

3. Defining Amalgamation 1 Definition “Amalgamation refers to the process of combining two or more separate entities, such as companies or organizations, to form a single new entity. This can be achieved through various means, including mergers and consolidations .” Amalgamations can be achieved through mergers (where companies combine to form a new entity) or consolidations (where multiple companies create an entirely new entity).

4. Defining Amalgamation 1 Definition “It is a process where two or more companies transfer their businesses to a newly formed company.” The transferor companies are wound up Amalgamation is the process of two or more companies coming together to form a new entity. Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 1956 or any other statute which may be applicable to companies.

5. Defining Amalgamation Transferor company: means the company which is amalgamated into another company . Transferee company: means the company into which a transferor company is amalgamated.

6. THE TYPES OF AMALGAMATION Horizontal When two companies in the same industry merge to gain market share and reduce competition. Vertical When a company Amalgamation another in a different stage of the same product value chain to increase efficiency and control costs. Conglomerate When two companies in unrelated industries merge to diversify their portfolio and reduce risk.

7. Acquisition / Takeover / A bsorption Meaning : Acquisition or Takeover refers to a- “A company gets liquidated and is sold to another company .” Absorption of Company is a way of business arrangement in which an existing company takes over the business of the another entity. The entity who gets absorbed goes into the liquidation process.  It means one existing company in taken over (purchased) by another existing company for an agreed consideration Refers to taking over controlling “stake in a company” by another company

8. Acquisition / Takeover / A bsorption Meaning : Taking over the business of one or more companies by an existing company Here, one existing company will continue the business with the same identity The seller companies are liquidated

9. EXTERNAL RECONSTRUCTION “It is a process by which company transfers its business to another company consisting substantially of the same shareholders with a view to its being continued by the transferee company.” Its involves winding up of an existing company and formation of a new company A company gets liquidated and in place of it a new company is formed. In short ―One liquidation and one formation or External Reconstruction Goldstar = LG

10. Amalgamation Existing companies A and B are wound up and a new company C is formed to take over the businesses of A and B – Amalgamation In short ―Two or more liquidations and one formation. Absorption Existing company A takes over the business of another existing company B which is wound up In short ―One liquidation and no formation External reconstruction A New Company X is formed to take over the business of an existing company Y which is wound up. In short ―One liquidation and one formation

11. Amalgamation vs. Acquisitions Aspect Amalgamation Acquisitions Nature Combining businesses to create something new Adding a new company or part of a company to another business Legal Status Both companies cease to exist, forming a new entity The acquiring company takes over the acquired company Ownership The shares of both companies get replaced by the shares of the new entity The acquiring company owns the shares of the acquired company

12. Example: in simple words, X + Y = Z Real life example: Hero + Honda = Herohonda . Example: A + B = B Real life example: hutch + Vodafone = Vodafone . Example: A = B Real life example: Goldstar = LG

13. WHY AMALGAMATE ? To acquire cash resources Eliminate competition Tax savings Economies of large-scale operations Increase shareholders value To reduce the degree of risk by diversification Managerial effectiveness To achieve growth and gain financially

14. ACCOUNTING PROCEEDURE 1 Calculation of Purchase Consideration 2 Discharge of Purchase Consideration 3 4 Closing the books of the Transferor Company (Selling Company) Passing Opening entries in the books of Transferee Company(Purchasing Company)

15. Amalgamation vs. Merger Amalgamation Combining businesses to create a new entity. Merger Joining two equal companies to form a new joint entity.

16. Real-life Examples Disney and Pixar In 2006, Disney acquired Pixar in a $7.4 billion amalgamation deal. AOL and Time Warner In 2000, AOL acquired Time Warner in a $164 billion merger. Exxon and Mobil In 1999, Exxon and Mobil merged to create the world's largest company at the time with a market cap of $504 billion.

17. Challenges and Way Forward 1 Challenges Amalgamation needs patience, capital, and investment of human capital to work efficiently. 2 The Way Forward Design a pragmatic approach to tackle the integration challenges, build a powerful team, communicate clearly and often, and have a post-integration monitoring plan. 3 Conclusion Amalgamation is a great way to expand your business, but it requires careful planning and execution.

18. Amalgamation vs. Acquisitions Aspect Amalgamation Acquisitions Nature Combining businesses to create something new Adding a new company or part of a company to another business Legal Status Both companies cease to exist, forming a new entity The acquiring company takes over the acquired company Ownership The shares of both companies get replaced by the shares of the new entity The acquiring company owns the shares of the acquired company

19. Importance of Amalgamation in Business Strategy 1 Market Expansion Amalgamation helps businesses expand their market presence and reach new audiences. 2 Cost Savings Amalgamation leads to economies of scale, resulting in cost savings and greater efficiency. 3 Cross-selling Opportunities Amalgamation provides the chance for companies to access new products and create cross-selling opportunities.