Differences between Amalgamation and Absorption
Amalgamation: When two or more companies doing business of similar nature combine to form a new company, it is called amalgamation. It is worth noting that this new company buys the business of all the companies involved in the integration. For example, if a new company Mohan Ltd. is formed to reduce the business of two existing companies Ram Ltd. and Shyam Ltd., it is amalgamation.
Objectives of Amalgamation and Absorption
Following are the main objectives of integration and merger-
1. To end mutual competition and animosity between the companies to be merged.
2. To capture the savings that result from large scale production.
3. To increase the capital so as to meet the goals and plans for which funds are needed.
4. To establish better control over the commodity markets.
5. To distribute the produced goods and services over a wider area.
6. High salaried persons to avail the services of highly efficient persons.
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