Consolidations of Merger - amalgamation
A consolidation is a combination of two or more companies into a new company. In this form of merger all the existing companies which combine go into liquidation and form a new company with a different entity. The entity of consolidating corporation is lost and their assets and liabilities are taken over by the new corporation or company. The assets of old concerns are sold o the new concern and their management and control also passes into the hands of the new concern. Suppose these are two companies called A Ltd. And B Ltd. And they merger together to form a new company called AB Ltd. Or C Ltd. It is a case of consolidation. The term consolidation is also sometimes used as amalgamation. However a merger through absorption may be distinguished from a merger through consolidation. One concern acquires the business of another concern without forming a new company in the case of absorption whereas a new concern is formed by the union of two or more concerns in case of consolidation. Consolidation generally takes place between two equal size concerns and the size of concerns considerably differs in case of a merger through absorption. Generally a small concern is merged with a big concern. Through both the terms are used interchangeably. The methods and problems of financing mergers through absorption consolidations are also similar.