Investment Term for the Day - Amalgamation

An amalgamation is a combination of two or more companies into a new entity. Amalgamation is distinct from a merger because neither company involved survives as a legal entity. Instead, a completely new entity is formed to house the combined assets and liabilities of both companies.

The term amalgamation has generally fallen out of popular use in the United States, being replaced with the terms merger or consolidation even when a new entity is formed. But it is still commonly used in countries such as India.

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 be troublesome for consumers and the marketplace.