Business Amalgamations

Business amalgamation refers to the process where, by mutual agreement, the owners of two or more business combine resources to operate as one legal entity. This can take any of the following forms.

  • Merger
  • Acquisition
  • Take over
  • Franchise.

These are explained briefly as follows;

In a merger, two companies cease to exist as separate entities and register a single entity where both share a common stake. The managers of the two firms sign an agreement stipulating the terms and conditions of the merger and depending on which firm was larger before the merger, considerations such as lines of reporting are realigned. A new legal name will be identified that takes into account the identity of the previous entities.

In an acquisition, two companies combine resources to run as a single entity but in this case, the company that is usually larger than the other in terms of financial resources and experience, will in essence take over the operations and management of the new entity.

Take over
In a takeover, the entrepreneur of a business will relinquish ownership of his firm to another, usually larger company in exchange for a financial consideration.

In a franchise, a sponsor identifies someone with an idea or a proposal and decides to fund his project and give it the financial boost it needs to start off. In this case, the entrepreneur is the franchisee who operates under the franchiser’s name.

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