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According to accounting standards 14, amalgamation is done according to the nature of merger and nature of purchase. Amalgamation is the process of unification between two or more companies involved in similar business to form a new company.If the amalgamation nature of merger, method of accounting is used in pooling of interest method and if amalgamation nature of purchase then purchase method of accounting is used.Pooling of interest methodIn this acquired form the capital account is removed and this removed account is replaced by new stock of the acquiring company. In this method deal is nothing but exchange of equity ... Read More
Amalgamation is the process of combining two or more companies into a single company or absorption of one company by another.In absorption, bigger companies take control over smaller companies. The main difference between an amalgamation and a merger is that in amalgamation, neither of the companies exists. A new company is formed and both company's assets and liabilities are combined.TypesThe types of amalgamation are as follows −MergerIn this, in addition to assets and liabilities, shareholder's interest and business are pooled.The book adjustments are needed, if they want to carry the same business.PurchaseIn this, shareholders do not have proportionate equity shares ... Read More
Subsidiary mergers are divided into following −Forward triangular mergerReverse triangular mergerFirst, let us learn about the forward triangular merger.Forward triangular mergerIn a forward triangular merger, the company acquires another company through its subsidiary company.This type of merger is also called indirect merger.In this, a combination of cash and stock is used for financing. If only cash is used, that amount is taxable.AdvantagesThe advantages of forward triangular merger are as follows −More flexible.Cash and stocks are used for financing.More protection to buyers.DisadvantagesThe disadvantages of forward triangular merger are as follows −Less preferred.Have to reassess all contracts, licenses etc.Increase in costs for ... Read More
The reverse merger, forward merger and subsidiary merger are explained below along with their advantages and disadvantages.Reverse mergerIn reverse merger, A private firm becomes a public company.A smaller company obtains a bigger company.Parent company mergers with its subsidiary.Company in losses obtains the company in profits.AdvantagesThe advantages of reverse merger are as follows −Private firm become public company without IPOTax benefitsDisadvantagesThe disadvantages of reverse merger are as follows −Shareholders value remains the same.Can/sometimes lead to operations inefficiency.Forward mergerForward merger is also called direct merger. In this, two companies are combined directly to form a single company under the name of the ... Read More
Irrespective of size or its nature every firm or organization needs growth and expansion and these can be done by the way of integration followed by firms or organizations. The main integrations followed by companies or vertical and horizontal integration.Horizontal integration involves integration of two companies in same business line or same chain whereas vertical integration involves integration of various entities in distribution chainHorizontal integrationIf integration is done between companies who are in the same line of business or they have the same business activities is called horizontal integration. They may have the same complementary product, by product or other ... Read More
In business, whether you are buyer or seller, the transactions can be made either in purchase and sale of assets or in purchase and sale of common stock. The buyer or seller can choose their option (there can be various reasons in choosing their option).An asset purchase transaction is the sum of sales of individual assets and agreed upon liabilities. In stock acquisition, ownership transfer will take place and the entity has the same assets and liabilities.Asset purchaseIn this, the legal entity will not change but the buyer will purchase individual assets (equipment's, goodwill, inventory etc.). An asset sale does ... Read More
The terms acquisition, takeover, merger and amalgamation are explained below −AcquisitionAcquisition is a purchase of more than 50% shares/stake of another company.Payments can be made in either cash or stock or by both.Friendly approaches or hostile approaches are used in acquisition.Friendly approach means Boards of directors support the acquisition.Hostile approach means Boards of directors will not support the acquisition.TakeoverTakeover is transfer/control interest of a company either by friendly or hostile approach.Generally, takeover is done by bigger companies.It can be done in straight, ownership capture, revival and bailout.MergerUpon approval of management and shareholders (in case of public companies), two companies combine ... Read More
Acquisition is the process of acquiring one or more companies by acquirer without affecting the acquirer brand name or autonomy. The targeted company or companies will exist and continue their operations but they have to work under acquirer name and their terms. This ownership change takes place.The main objective of acquisition is to improve present performances, decrease the competition in the market, to gain technology and expertise and economic scale.The purpose and classification is based on involved companies and reasons may not be the same because companies at times don’t make them public due to different reasons.TypesThere are different types ... Read More
Merger is nothing but an agreement between two or more organizations or companies to form as a one company or organization.The main objective of merger is to gain more market share or to enter into new market areas or sectors and maximize their profits. It also helps companies to restructure their business units according to market changes.Merger helps companies to sustain market changes and go for more customer base.Types of mergersThe types of mergers are explained below −Horizontal Merger − If one company merges with another company or companies which have indirect competition in terms of product lines/markets is called ... Read More
The main objective of both merger and acquisitions are the same, that is to restructure their corporate order. That means both are involved in joining two or more than two business entities to restructure their corporate structure according to changes in market or in their sector.MergerMerger involves combining an individual organization to give rise to a new business unit or entity. In merger, a new entity, name, ownership, employees (combination of organizations) and management will form. The benefit in the merger is mutual that means merger organizations will have certain benefits.The main objective of merger is to expand their present ... Read More