What is amalgamation? At one time, it was common in the United States to refer to business amalgamation and mergers in the same breath. In fact, in the 1930s and 1940s, this terminology was so well-known that the sidekick of a popular superhero, Doc Savage, had a catchphrase, “I’ll be superamalgamated!” Today, however, it’s more common in American English to speak of mergers, and references to amalgamation of companies are more common in countries influenced by older British English, such as India.

However, amalgamating and merging are not necessarily the same thing, and if you’re in a position where you have to deal with business acquisitions and associated financial issues, it’s important to understand the differences. Here’s a closer look at what business amalgamation is, how the process works, how it impacts business capital and when it makes sense to amalgamate.

What Is Amalgamation?

Amalgamation, often referred to as consolidation in an accounting context, refers to a type of business combination where two companies join to form a new legal entity. In informal speech, three different distinct types of combinations may loosely be referred to as amalgamations. For better clarity of understanding and expression, it is helpful to distinguish between amalgamations proper and two similar types of business combinations, known as acquisitions and mergers:

  • Acquisition (2 or more survivors): In an acquisition, one company, known as the parent company, purchases 50 percent or more shares of interest in one or more smaller companies, known as subsidiary companies. In this case, the parent company assumes ownership of the subsidiary company, and all companies survive the transaction. An example of an acquisition is Disney’s acquisition of Marvel Entertainment in 2009, which left Marvel intact as a subsidiary of Disney.
  • Merger (1 survivor): In a merger, the purchasing company buys all assets of the company being purchased. In this case, the company being purchased ceases to exist, and only the purchasing company survives. For example, when Charter Communications acquired Time Warner Cable in 2016, Charter paid $78.7 billion for Time Warner Cable’s assets, and Time Warner Cable ceased to exist.
  • Amalgamation (No survivors): In amalgamations, properly speaking, both companies involved in the transaction join to become part of an entirely new company. The companies transferring their assets into the new entity are called the transferors, while the new company receiving the assets is called the transferee. As a result of this transfer, both original companies cease to exist, leaving no survivors predating the formation of the new company. One of the most famous amalgamations of all time was the 1999 combination of the Exxon and Mobil oil companies into one new company, ExxonMobil, with neither company surviving as such, though the Exxon and Mobil brand names continue to be used by their ExxonMobil parent.

It is useful to keep these conceptual distinctions in mind when talking about business combination deals so that you’re clear on exactly what type of transaction is involved, how many surviving companies there are and other related details such as how managerial control and assets are being transferred. However, in practice, it’s also important to realize that these terms are sometimes used loosely or interchangeably in informal conversation or writing, so you can’t always assume the person you’re talking to or the document you’re reading is using a term in a consistent way. When you’re not sure exactly what type of combination is being referenced, be sure to seek clarification by asking questions or rereading carefully.

How the Amalgamation Process Works

Amalgamating usually begins with an analysis by investment bankers and lawyers to determine which form of combination would be most financially advantageous for the companies involved. After a proposal for amalgamation is made, it must be approved by the board of directors of each company involved, along with any applicable regulatory bodies.

Once approval is given, there are two major ways the amalgamation process can proceed, with one way resembling a merger and one resembling an acquisition:

  • Amalgamation in the nature of merger: In this type of amalgamation, resembling a merger, all shareholder interests, assets and liabilities of the transferor companies are pooled together and transferred to the transferee company. Shareholders of the transferor entities holding at least 90 percent face value of equity shares become shareholders in the new company. No adjustments to book values are made.
  • Amalgamation in the nature of acquisition: In this type of amalgamation, resembling an acquisition, shareholders of the transferor company do not gain a proportionate shareholding interest in the equity of the new company.

After the new company is formed, shares of the new company are distributed to shareholders of the transferor company. The transferor company is then liquidated, and the transferee company takes over the transferor’s assets and liabilities.

How Amalgamation and Capital Are Calculated

The amalgamation process affects business capital differently depending on which method of amalgamation is used. With amalgamation in the nature of a merger:

  • book values remain unchanged.
  • assets, liabilities and reserves of the transferor companies pass in their existing carrying amounts to the transferee company, in the same amounts and form as the date that amalgamation occurred.
  • the transferor’s profit and loss gets combined with that of the transferee, or transferred to the general reserve if applicable.
  • reserves are adjusted to reflect differences between amounts recorded as share capital issued, along with consideration of cash or other assets on one side and share capital of the transferor company on the other.

When amalgamation in the nature of acquisition is used:

  • the transferee company may incorporate the assets and liabilities of the transferor companies by their existing carrying amounts, or by allocating evaluation to individual assets and liabilities of the transferors based on their fair values at the time of amalgamation.
  • reserves from the transferor companies, other than statutory reserves, are not counted in the transferee’s financial statements.
  • purchase consideration that exceeds net asset value is recorded as goodwill, while that which falls short is credited to capital reserve.
  • non-cash elements can be considered at fair value.

In practice, the applications of these guidelines have more complex rules that should be handled by a professional accountant.

When Amalgamation of Companies Makes Strategic Sense

Amalgamation has several pros and cons that make it strategically advantageous in some situations and less so in others. Amalgamation can be useful for:

If you’re pursuing any of these goals, amalgamation may be an option to consider.

On the other hand, amalgamation also has potential drawbacks, which should be weighed in before making a decision:

  • Combining liabilities of two companies may increase debt
  • Brand identity marketing benefits may be lost
  • Eliminating competitors may promote monopoly, artificially inflating pricing and reducing selection for consumers and thereby increasing dissatisfaction
  • Combining workforces may force layoffs

These potential downsides should be weighed against the potential benefits of amalgamation, with both quantified financially, before making a decision. An informed decision should be made in consultation with your accounting and legal teams.


Amalgamating is an option for combining businesses into a completely new company instead of merging them into one or combining one into another. It can be done in two ways in terms of transferring ownership and assets, with one way resembling a merger and the other resembling an acquisition. Business amalgamation can be useful for purposes such as eliminating competitors, increasing a company’s value or cutting taxes, but it can also have drawbacks such as combining liabilities. A cost-benefit analysis assisted by your banking and legal teams can help you decide if amalgamation is the right choice for you.

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