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Types of Amalgamation

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Point-wise and brief description of all types with relevant pictures and examples.

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Types of Amalgamation

  1. 1. MERGER  When two or more companies combine to become one company  In India, Merger is called Amalgamation  May form a new company May merge into an existingone
  2. 2. MERGER THROUGH ABSORPTION: Combine into an existing company where one loses its identity EXAMPLE : TATA Fertilizers Ltd. By TATA Chemicals Ltd. , TATA Oil Mills Ltd. By Hindustan Lever Ltd. THROUGH CONSOLIDATION: Two companies dissolved to form a new company. EXAMPLE: Hindustan Computers Ltd.
  4. 4.  Merging of two companies who are direct competitors of each other.  Serve the same market and sell the same product. VERTICAL MERGER  Merging of two companies producing different goods and services  Supplier mergingwith the produceris the essenceof Vertical Mergers.
  5. 5.  Merging companies do not possess any common business ties. BENEFITS OF MERGER REASONS OF FAILURE  Larger marketshare  Increasein plant capacity  Diversification of product and service offerings  Reduction of financial risk  Utilization of operational expertise and researchanddevelopment (R&D)  Lack of human integration  Mismanagement of cultural issues  Lack of communication
  6. 6. ACQUISITION  The act of acquiring effective control over the assets or management of a company without any combination of companies.  Companies may remain independent, separate but there is changein control of the companies.
  7. 7. Rank Year Purchaser Purchased Transaction value (in mil. USD) 1 2000 America Online Inc. (AOL) Time Warner 164,747 2 2000 Glaxo- Welcome Plc. SmithKline Beecham Plc. 75,961 3 2004 Royal Dutch Petroleum Co. Shell Transport & Trading Co 74,559 4 2006 AT&T Inc. BellSouth Corporation 72,671 5 2001 Comcast Corporation AT&T Broadband & Internet Services 72,041 6 2004 Sanofi-Synthelabo SA Aventis SA 60,243 7 2000 Spin-off: Nortel Networks Corporation 59,974 8 2002 Pfizer Inc. Pharmacia Corporation 59,515 9 2004 JP Morgan Chase & Co Bank One Corp 58,761 TOP ACQUISITIONS
  8. 8. TAKE OVERS  Purchase of a TARGET company by another ACQUIRER or BIDDER. Acquiring company becomes responsible for all holdings, operations and debt. In case of a Publicly-traded company, an offer is made for all its outstanding shares.
  9. 9. TYPES OF TAKEOVERS  FRIENDLY TAKEOVERS : Acquisition of the target company through negotiations between existing promoters and prospective promoters. Resortment of common objectives of both theparties.
  10. 10.  HOSTILE TAKEOVERS : Thesecantakeplaceunderthree conditions – the Board rejects the offer, the bidder continues to pursue it or the bidder makes the offer without informing the Board beforehand.