Amalgamation is a type of business arrangement in which two or more entities are merged to form a new entity in such a way that old entities cease to exist. All the assets and liabilities of the old entities are taken over by the newly formed merged company.
Purpose
The major purpose of amalgamation are as follows:
1. to save the interest of the shareholders due to continuous losses,
2. to increase the income of the shareholders by the expansion of operation which results in lower per-unit cost.
3. to reduce unhealthy competition in the industry,
4. to avoid severe financial losses and crises which may arise as a result of unhealthy competition.