Merger is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long

term profitability. Usually mergers occur in a consensual (occurring by mutual consent) setting. The dictionary meaning of Mergers is to combine commercial or industrial firms or to lose identity by being absorbed in something else. However the Companies Act, 1956 does not define the term Merger or Amalgamation. It deals with schemes of merger/ acquisition which are given in s.390-394 A, 395,396 and 396 A.

In common parlance, the terminologies Amalgamation or merger would mean the two business entities joining together to make totally new business entity or to allow one business entity to survive absorbing the other one. Amalgamation or merger is also a method of reconstruction. In amalgamation, two or more companies are fused into one by merger or by one taking over the other. When two companies are merged and are so joined as to form third company or one is absorbed into other or blended with another, the amalgamating company loses its identity. There may be amalgamation either by transfer of two or more undertakings to a new company or by the transfer of one or more undertakings to an existing company. An amalgamation may be defined as an arrangement where by the assets of the two companies which has as its share holders all, or substantially all the share holders of the two companies1.

But they differ in this regard that amalgamation is a used where two or more companies are there but merger is when one company is blended with another.

Classifications of mergers Horizontal mergers take place where the two merging companies produce similar product in the same industry. A horizontal merger is when two companies competing in the same market merge or join together. This type of merger can either have a very large effect or little to no effect on the market. When two extremely small companies combine, or horizontally merge, the results of the merger are less noticeable. These smaller horizontal mergers are very common. If a small local drug store were to horizontally merge with another local drugstore, the effect of this merger on the drugstore market would be minimal. In a large horizontal merger, however, the resulting ripple effects can be felt throughout the market sector and sometimes throughout the whole economy.

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Conclusion Mergers and acquisitions have gained importance in recent times. Business consolidation by large industrial houses, consolidation of business by multinationals operating in India, increasing competition amongst domestic companies and competition against imports have all combined to spur mergers and acquisitions activities in India.