Complete Consolidation

When two or more business unit are combined in such a way that they loose their Separate entity, such combination is known as complete consolidation and it may takes the following two forms: Complete Consolidation

1. Amalgamation

2. Merger

1. Amalgamation:

An amalgamation is a form of business combination here two or more companies and combined together in such way that they lose their separate legal entity and with the combination of them a new company is formed to acquire carry on the business of old companies In short, Amalgamation takes place when two or more companies liquidated and one new company is formed to purchase business of liquidating companies at an agreed value Liquidating companies lose their separate legal entity ad new company controls and runs the business of winding companies. For example, company A is formed to purchase the business of company B and company C which a competing one, such combination is known as amalgamation. So, we can say that amalgamation is equal to two or liquidations and one formation.

Advantages:

• The business competition among amalgamated units is eliminated.
• The economies of large scale are achieved in production, sales, management and finance. .
• It is a stable form of combination because the companies once combined can never separated.
• The managerial and advertising costs are reduced and product can be sold atncheaper.
• There is equal treatment of all the shareholders of the liquidating companies.”
• The amalgamation brings improvements in financial position of the combined business.
• By amalgamation, the technical and development becomes easy.

Disadvantages:

• The formation of amalgamation is difficult because the consent of three-forth the members of the liquidating companies required for this process.
• The companies once amalgamated can never separate themselves from the combination.
• There is a danger of overcapitalization.
• There may be difficulties in the management of a big concern. This combination cannot be kept secret because everything is legally published for the knowledge of general public.

2.Merger:

The merger is a form of business combination where one existing company purchases the business of another one or more existing companies and merges them into it. Here there is no new formation but there is liquidation of one or more companies, which are purchased by a big existing company. This form of business combination is also known as absorption because one big company absorbs into it the business of liquidating companies. For example company A purchase the business of company B and company C and merges them into it, this will be the case of merger (absorption). The company B and company C (liquidating companies) will lose their separate legal entities but there is no new formation because company A is already in existence.

Advantages:

• The business competition among the member units is eliminated.
• The merger is a combination of permanent nature The rights of the shareholders are not distributed because the shareholders
• the liquidating companies become Dfa Ho the shareholders of absorbing company.
• The economies of large-scale production are availed.
• The cost of management and advertising etc. is reduced.

Disadvantages:

• The formation of merger is much difficult because the consent of the
• shareholders is necessary.
• The companies once merged can never be separated
• There is a danger of over capitalization
• There may be difficulties in the management of a big concern.
• This form of combination cannot be kept secret because everything is legally published for the knowledge of general public.