Amalgamation

Amalgamation typically happens between two or more companies engaged in the same
line of business or those that share some similarity in operations. Companies may
combine to diversify their activities or to expand their range of services. Since two or
more companies are merging together, an amalgamation results in the formation of a
larger entity. The transferor company which is the weaker company, is absorbed into the
stronger transferee company, making it form an entirely different company. This leads to
a stronger and larger customer base, and also means the newly formed entity has more
assets. Amalgamations generally take place between larger and smaller entities, where
the larger one takes over smaller firms. Amalgamation is a way to acquire cash
resources, eliminate competition, save on taxes, or influence the economies of
large-scale operations. Amalgamation may also increase shareholder value, reduce risk
by diversification, improve managerial effectiveness, and help achieve company growth
and financial gain.
On the other hand, if too much competition is cut out, amalgamation may lead to a
monopoly, which can cause trouble for consumers and the marketplace. It may also
lead to the reduction of the new company's workforce as some jobs are duplicated and
therefore make some employees obsolete. It also increases debt: by merging the two
companies together, the new entity assumes the liabilities of both.
The terms of amalgamation are finalized by the board of directors of each company.
The plan is prepared and submitted for approval. For example, the High Court and
Securities and Exchange Board of India (SEBI) must approve the shareholders of the
new company when a plan is submitted. The new company officially becomes an entity

and issues shares to shareholders of the transferor company. The transferor company
is liquidated, and all assets and liabilities are taken over by the transferee company.
An example of it would be when In late 2021, it was announced that media companies
Time Warner and Discovery, Inc. would combine in a deal worth an estimated $43
billion. Owned by AT&T, Time Warner would be amalgamated with Discovery. The new
entity, known as Warner Bros. Discovery, Inc., is expected to close at some point in late
2022 and will be headed by Discovery CEO David Zaslav.