Merger and its type

A merger can be defined as combining two or more things to form one object in layman’s language. Under company law, it can be explained as combining two or more entities for one company, which results in combining all the assets and liabilities under one company.

For example- there are two companies, A and B, which have different assets and liabilities. When these companies decide to combine their assets and liabilities under one name, say, AB company, this would be a merger. This AB company would form a new entity.

This process consolidates all the companies from multiples companies.

Here the question arises whether amalgamation and merger are interchangeable terms.

Amalgamation means a combination of two or more companies into one. Nevertheless, it is to understand that it is a type of merger only. Here the primary purpose of the companies is to formulate to reduce the operating cost and run the same business.

Here there is another concept that has to be understood. What will happen if a listed company would like to merge with a listed company. If a listed company meets an unlisted company under the Act, then the unlisted will not be automatically listed. The option is given to the transferring company to remain unlisted until it is listed or applies for listing, provided that the shareholders of the listed company are given the opportunity to opt-out. It also provides that the NCLT must provide an exit route for the shareholders of a transfer company that decides to exit the transfer company by making payments that cover the value of the shares and other benefits. As the entire merger process guides them, non-compliant shareholders will have the opportunity to exit the issue.

TYPES OF MERGERS-

  1. Horizontal merger- this happens between the companies that run in the same field and compete in the same industry. For instance- there are two firms A and B, and both compete in the stationery field. This type of merger would amount to a Horizontal merger.
  2. Vertical merger– Under this merger, the companies are working under the same product roof but are at different levels of the business’s product. For instance, companies X and Y are reworking under the clothing business. However, one formulates the tread, and the other is a textile mill.
  3. Co Generic merger- In this, companies work with the related product but not with the same product. For instance, there are two companies’ X and Y, and both do work related to clothing. However, one produces dye, and the other produces the thread.
  4. Conglomerate merger- This refers to when the companies are engaged in different activities and are neither related horizontally or vertically. It means that they have entirely different businesses. For instance, one company deals in clothing and the other in perfumes.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

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The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

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