how amalgamations work
amalgamations typically happen between two or more companies engaged in the same line of business or that share some similarity in their operations usually the process involves a larger entity called a transferee company absorbing one or more smaller transferor companies before creating the new entity the terms of an amalgamation are finalized by the board of directors of each company involved the plan is prepared and submitted to regulators for approval in india for example that authority resides in the high court and securities and exchange board of india sebi indian tax law defines amalgamation somewhat broadly as the merger of one or more companies with another company or the merger of two or more companies to form one company it refers to the merging companies as the amalgamating company or companies while the company they merge with or which is newly formed as a result of the merger is the amalgamated company 1in canada amalgamations must be approved by corporations canada and the relevant provincial and territorial governments canada defines amalgamation as when two or more corporations known as predecessor corporations combine their businesses to form a new successor corporation 2once approved the new company officially becomes a legal entity and can issue shares of stock in its own name the pros and cons of amalgamationsamalgamation is a way businesses can amalgamation may also increase shareholder value reduce risk through diversification improve managerial effectiveness and help the new company achieve financial results and levels of growth that would have been more difficult for its predecessor companies on the other hand if too much competition is eliminated amalgamation may lead to a monopoly which can be troublesome for consumers and the marketplace and bring about government intervention it may also lead to a reduction in the new company s workforce by making some former employees redundant costing them their jobs in addition it can increase debt possibly to a dangerous level by combining two or more companies together the new entity assumes the liabilities of all involved can improve competitivenessmay reduce taxesachieves economies of scale