FORMS OF COMBINATION

I) Mergers or Amalgamation A merger is a combination of two or more companies into one company According Company Act, 1956,the amalgamation includes absorption Thus, merger or amalgamation may take any of the two forms1)Absorption- a combination of two or more companies into an existing company is known as absorption. Eg-A ltd. And B ltd, company B ltd. Is merged into A ltd. Leaving all its assets and liabilities to the acquiring company A ltd; company B ltd. Is liquidated.

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2) Consolidation- A consolidation is a combination of two or more companies into a new company. E.g.- two company A ltd. And B ltd. And they merge together to form a new company called AB ltd. Or C ltd.

II) ACQUISITION AND TAKE-OVER

The ownership of one or more other companies and combine their operations. It is simply an act of acquiring control over management of other companies.

Friendly take-over- mutual agreement Hostile take-over-opposed by the target company.

AMALGAMATION MEANING

Amalgamation is a restructuring phenomenon in which two or more companies are liquidated and a new company is formed to acquire business. In simpler terms, it means that a new company is formed that buys the business of minimum two companies.

AMALGAMATED COMPANY AND AMALGAMATING COMPANIES

The new company or the acquiring company is known as the amalgamated company. It acquires the assets and liabilities of the other companies known as amalgamating companies. Commonly, such companies are also referred as target companies or merging companies.

REASONS OF MERGERS AND AMALGAMATION

Economic of large scale Synergy Growth Diversification-operating in different lines Utilization of Tax shields Increase in value- the value of merger company is greater than the sum of the independent values of the merged companies Elimination of competition Better financial planning- The profit of the company with short gestation period will be utilized to finance the other company.

THE ESSENTIAL CONDITIONS OF AMALGAMATION ARE-:

All properties of amalgamating companies become property of amalgamated company. All liabilities of amalgamating companies become liabilities of amalgamated company. Shareholders holding not less than three fourth in value of shares in amalgamating company become shareholders of amalgamated comapany.

TYPES OF MERGERS MERGERS MAY BE OF THE FOLLOWING TYPES:

(A) Vertical merger- firms engaged in different stages of production or distribution of the same product or service E.g.-textile company merge with a transport company for carrying its product to different places

(B) Horizontal merger-firms dealing in same product or service join together E.g.-two transport company (C) Conglomeration-totally different activities join hands E.g.- textile co. merge with a vegetable oil mill.