Amalgamation vs. Absorption — What's the Difference?
By Tayyaba Rehman & Fiza Rafique — Updated on May 14, 2024
Amalgamation involves merging two or more companies into a new entity, whereas absorption entails one company taking over another without forming a new company.
Difference Between Amalgamation and Absorption
Table of Contents
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Key Differences
Amalgamation is a process where two or more companies consolidate their assets, liabilities, and identities to form a completely new entity. On the other hand, absorption involves a stronger company incorporating a weaker or smaller company into its operations, without creating a new entity.
In amalgamation, the original companies cease to exist as separate legal entities, and a new corporate structure is formed. Whereas in absorption, the absorbed company loses its identity and becomes part of the absorbing company, which retains its name and legal structure.
Financially, amalgamation is treated as a merger of equals where all involved companies dissolve their original corporate selves. Conversely, absorption is often seen as an acquisition where the absorbing company dominates the terms and retains its financial identity.
Operationally, amalgamation can lead to a more significant restructuring of assets, liabilities, and human resources as it involves creating a new company. In contrast, absorption might require less restructuring since the absorbed company is integrated into the existing structure of the absorbing company.
Strategically, amalgamation is typically pursued to combine strengths and diversify risks, often resulting in synergy benefits for the new entity. Absorption, however, is usually driven by the desire to eliminate competition, acquire assets, or expand market reach without diversifying the business structure.
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Comparison Chart
Definition
Merger of two or more entities into a new entity
One entity takes over another without new formation
Entity Status
Original entities dissolve
Only absorbed entity dissolves
New Entity Formation
Yes
No
Purpose
Combine strengths, diversify risk
Eliminate competition, expand market reach
Financial Identity
New combined entity
Dominant identity of absorbing company
Compare with Definitions
Amalgamation
A combination of assets and liabilities of merging firms.
The board discussed the amalgamation's implications on shared assets.
Absorption
Dissolution of an entity's legal identity into another.
After absorption, the brand of the smaller company ceased to exist.
Amalgamation
Strategic unification under a new corporate identity.
The amalgamation aimed to leverage combined technological resources.
Absorption
Integration of operations and resources of an absorbed company.
Post-absorption, the workforce was integrated into the larger company’s system.
Amalgamation
The outcome of a mutually agreed merger.
The amalgamation was seen as a strategic move to counter competitive pressures.
Absorption
A takeover strategy without forming a new company.
The absorption strategy was clear—expand market presence.
Amalgamation
A merger process forming a new entity.
The amalgamation of the two firms resulted in a more robust corporate structure.
Absorption
A form of corporate acquisition to strengthen market position.
The company used absorption to eliminate its nearest competitor.
Amalgamation
Legal consolidation of two or more corporations.
The legal process of amalgamation was completed by year-end.
Absorption
Acquisition where one company incorporates another.
The absorption of the smaller company was completed swiftly.
Amalgamation
The act of amalgamating or the condition resulting from this act.
Absorption
The act or process of absorbing or the condition of being absorbed.
Amalgamation
A consolidation or merger, as of several corporations.
Absorption
A state of mental concentration.
Amalgamation
The production of a metal alloy of mercury.
Absorption
The act or process of absorbing or of being absorbed as,
Amalgamation
The process of amalgamating; a mixture, merger or consolidation.
Absorption
(obsolete) engulfing; swallowing up, as of bodies or land.
Amalgamation
The result of amalgamating; a mixture or alloy.
Absorption
Assimilation; incorporation.
The absorption of a smaller tribe into a larger
The absorption of bodies in a whirlpool
Amalgamation
(specifically) The production of an alloy of mercury and another metal.
Absorption
The imbibing or reception by molecular or chemical action, of radiant energy; the process of being neutrons being absorbed by the nucleus; interception.
The absorption of light, heat, electricity, etc.
Amalgamation
(obsolete) The intermarriage and interbreeding of different ethnicities or races.
Absorption
(meteorology) The process in which incident radiant energy is retained by a substance (such as an air mass) by conversion to some other form of energy (such as heat).
Amalgamation
The act or operation of compounding mercury with another metal; - applied particularly to the process of separating gold and silver from their ores by mixing them with mercury.
Absorption
(physiology) in living organisms, the process by which the materials of growth and nutrition are absorbed and conveyed to the tissues and organs; taking in by various means, such as by osmosis.
Amalgamation
The mixing or blending of different elements, races, societies, etc.; also, the result of such combination or blending; a homogeneous union.
Absorption
Entire engrossment or occupation of the mind.
Absorption in some employment
Amalgamation
The combination of two or more commercial companies
Absorption
Mental assimilation.
Absorption
(electrical engineering) The retaining of electrical energy for a short time after it has been introduced to the dielectric.
Absorption
The act or process of absorbing or sucking in anything, or of being absorbed and made to disappear; as, the absorption of bodies in a whirlpool, the absorption of a smaller tribe into a larger.
Absorption
An imbibing or reception by molecular or chemical action; as, the absorption of light, heat, electricity, etc.
Absorption
In living organisms, the process by which the materials of growth and nutrition are absorbed and conveyed to the tissues and organs.
Absorption
Entire engrossment or occupation of the mind; as, absorption in some employment.
Absorption
(chemistry) a process in which one substance permeates another; a fluid permeates or is dissolved by a liquid or solid
Absorption
(physics) the process in which incident radiated energy is retained without reflection or transmission on passing through a medium;
The absorption of photons by atoms or molecules
Absorption
The social process of absorbing one cultural group into harmony with another
Absorption
The process of absorbing nutrients into the body after digestion
Absorption
Complete attention; intense mental effort
Absorption
The mental state of being preoccupied by something
Common Curiosities
What is amalgamation?
Amalgamation is the merger of two or more companies to form a new legal entity.
Why do companies choose absorption?
Companies choose absorption to quickly expand their market reach or eliminate competition.
What is absorption?
Absorption is a form of acquisition where one company integrates another into its operations without forming a new entity.
What happens to the shareholders in an amalgamation?
Shareholders of the original companies typically receive shares in the newly formed entity.
What are the legal implications of absorption?
In absorption, only the absorbed company legally dissolves into the absorbing entity.
How do companies benefit from amalgamation?
Companies benefit from amalgamation through combined strengths, diversified risks, and potential synergy.
Are employees affected differently in amalgamation vs. absorption?
In amalgamation, employees may face restructuring under a new entity, whereas in absorption, integration into the existing workforce is more common.
What happens to the assets in an amalgamation?
Assets of the amalgamating companies are combined under the new entity.
What are the legal implications of amalgamation?
Amalgamation requires legal dissolution of the original entities and formation of a new one.
Can a small company absorb a larger one?
Typically, a larger company absorbs a smaller one, but reverse scenarios can occur under strategic circumstances.
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Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
Co-written by
Fiza RafiqueFiza Rafique is a skilled content writer at AskDifference.com, where she meticulously refines and enhances written pieces. Drawing from her vast editorial expertise, Fiza ensures clarity, accuracy, and precision in every article. Passionate about language, she continually seeks to elevate the quality of content for readers worldwide.
