Amalgamation vs. Absorption: Know the Difference
By Shumaila Saeed || Published on January 17, 2024
Amalgamation is the combination of two or more entities to form a new one, while absorption is when one entity fully integrates another without forming a new entity.
Key Differences
Amalgamation refers to the process where two or more separate entities merge to form a completely new organization. This process results in the dissolution of the individual identities of the merging entities. Absorption, on the other hand, involves one entity taking over another, where the absorbed entity ceases to exist as a separate identity but the absorbing entity retains its name and identity.
Shumaila Saeed
Jan 17, 2024
In amalgamation, the assets and liabilities of the merging entities are combined to form a new set of financial statements. This process often leads to the creation of a new legal entity. Absorption differs in that the assets and liabilities of the absorbed company are taken over by the absorbing company, and there's no creation of a new legal entity.
Shumaila Saeed
Jan 17, 2024
Amalgamation is often seen in scenarios where entities of relatively equal size decide to join forces to enhance market share, diversify, or gain economic strength. Absorption typically occurs when a larger company takes over a smaller one, often to eliminate competition, acquire technology, or expand its market reach.
Shumaila Saeed
Jan 17, 2024
In terms of employee impact, amalgamation can lead to a more significant reshuffling of roles and responsibilities as a new organizational structure is formed. In contrast, absorption may see fewer changes in the operational structure of the absorbing company, but significant changes, often reductions, in the absorbed company.
Shumaila Saeed
Jan 17, 2024
Amalgamation is generally a more complex process as it involves the integration of different cultures, systems, and policies of the merging entities. Absorption can be simpler in comparison, as the dominant culture and systems of the absorbing company often prevail.
Shumaila Saeed
Jan 17, 2024
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Comparison Chart
Definition
Combination of entities to form a new organization
One entity integrating another, retaining its original identity
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Jan 17, 2024
Legal Entity
Creation of a new legal entity
No new legal entity; absorbing entity continues
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Jan 17, 2024
Size of Entities
Often involves entities of similar size
Usually involves a larger entity absorbing a smaller one
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Jan 17, 2024
Financial Integration
Combined assets and liabilities to form new financial statements
Assets and liabilities of absorbed entity merge into absorbing entity
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Jan 17, 2024
Cultural Integration
Significant integration and potential reshuffling of roles
Dominant culture of absorbing entity often prevails
Shumaila Saeed
Jan 17, 2024
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Amalgamation and Absorption Definitions
Amalgamation
The fusion of distinct technologies, genres, or styles.
The new smartphone model is an amalgamation of cutting-edge technology and classic design.
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Jan 06, 2024
Absorption
The process by which one entity completely integrates another.
The absorption of the small tech firm by the industry giant was swift.
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Jan 06, 2024
Amalgamation
A blend of diverse cultures or traditions.
The city's culture is an amalgamation of traditions from around the world.
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Jan 06, 2024
Absorption
The assimilation of information or ideas.
Her absorption of the new language was impressive.
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Jan 06, 2024
Amalgamation
The process of merging ideas or elements from different sources.
The play's script was an amalgamation of various folk tales.
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Jan 06, 2024
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Absorption
The incorporation of nutrients into the body after digestion.
Vitamin D absorption is critical for bone health.
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Amalgamation
The combination of different datasets or information into a single unit.
The report was an amalgamation of data from several different surveys.
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Jan 06, 2024
Absorption
The emotional or mental engagement deeply in something.
His absorption in the book made him oblivious to his surroundings.
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Amalgamation
The act of amalgamating or the condition resulting from this act.
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Jan 05, 2024
Absorption
The act or process of absorbing or the condition of being absorbed.
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Jan 05, 2024
Amalgamation
The process of amalgamating; a mixture, merger or consolidation.
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Jan 05, 2024
Absorption
Assimilation; incorporation.
The absorption of a smaller tribe into a larger
The absorption of bodies in a whirlpool
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Amalgamation
(specifically) The production of an alloy of mercury and another metal.
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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.
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Jan 05, 2024
Amalgamation
(obsolete) The intermarriage and interbreeding of different ethnicities or races.
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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).
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Jan 05, 2024
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.
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Jan 05, 2024
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.
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Jan 05, 2024
Amalgamation
The mixing or blending of different elements, races, societies, etc.; also, the result of such combination or blending; a homogeneous union.
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Jan 05, 2024
Absorption
Entire engrossment or occupation of the mind.
Absorption in some employment
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Amalgamation
The action of combining or uniting multiple entities into a single form.
The amalgamation of the two companies resulted in a more diverse product line.
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Jan 06, 2024
Absorption
(electrical engineering) The retaining of electrical energy for a short time after it has been introduced to the dielectric.
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Jan 05, 2024
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.
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Jan 05, 2024
Absorption
An imbibing or reception by molecular or chemical action; as, the absorption of light, heat, electricity, etc.
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Jan 05, 2024
Absorption
In living organisms, the process by which the materials of growth and nutrition are absorbed and conveyed to the tissues and organs.
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Jan 05, 2024
Absorption
Entire engrossment or occupation of the mind; as, absorption in some employment.
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Jan 05, 2024
Absorption
(chemistry) a process in which one substance permeates another; a fluid permeates or is dissolved by a liquid or solid
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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
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Absorption
The social process of absorbing one cultural group into harmony with another
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Jan 05, 2024
Absorption
The process of absorbing nutrients into the body after digestion
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Jan 05, 2024
Absorption
The physical process of a substance being taken in or soaked up.
The sponge's absorption of water is quick and efficient.
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Jan 06, 2024
Repeatedly Asked Queries
Can amalgamation happen in non-profit organizations?
Yes, non-profits can amalgamate to pool resources and enhance impact.
Shumaila Saeed
Jan 17, 2024
What happens to employees during an amalgamation?
There can be a restructuring of roles and possible redundancies.
Shumaila Saeed
Jan 17, 2024
Is absorption common in competitive business environments?
Yes, it's often used to eliminate competition or acquire new technology.
Shumaila Saeed
Jan 17, 2024
What is amalgamation in business?
The merger of two or more companies to form a new entity.
Shumaila Saeed
Jan 17, 2024
Are shareholders affected differently in absorption compared to amalgamation?
In absorption, shareholders of the absorbed company often receive shares of the absorbing company, while in amalgamation, new shares are issued.
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Jan 17, 2024
Are amalgamations always voluntary?
They are typically mutually agreed upon by all parties.
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Jan 17, 2024
How does absorption differ from amalgamation in corporate restructuring?
Absorption is when a company takes over another and remains intact, whereas amalgamation creates a new entity.
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Jan 17, 2024
Can amalgamation occur across different industries?
Yes, it can happen across industries for diversification.
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Jan 17, 2024
Does absorption always lead to the dissolution of the absorbed company?
Typically, yes, the absorbed company ceases to exist as a separate entity.
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Jan 17, 2024
Does absorption require approval from regulatory authorities?
Yes, it usually requires regulatory approval to prevent monopolies.
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Jan 17, 2024
Can culture clash be a challenge in amalgamation?
Yes, integrating different corporate cultures can be challenging.
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Jan 17, 2024
Can absorption lead to a monopoly?
It can, which is why regulatory bodies often review such actions.
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Jan 17, 2024
What are the legal implications of amalgamation?
It involves creating a new legal entity, often with new contracts and legal structures.
Shumaila Saeed
Jan 17, 2024
Can a small company absorb a larger one?
It's uncommon but possible, especially if the smaller company is financially robust.
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Jan 17, 2024
What are the risks of amalgamation for stakeholders?
Risks include potential loss of value, cultural mismatches, and operational disruptions.
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Jan 17, 2024
How does customer perception change after an amalgamation?
It depends on the brands involved but can lead to a perception of strength or diversity.
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Jan 17, 2024
Does absorption typically involve a change in brand identity?
Not for the absorbing company, but the absorbed company's brand usually disappears.
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Jan 17, 2024
What is the main financial motive behind absorption?
To acquire assets, eliminate competition, or gain market share.
Shumaila Saeed
Jan 17, 2024
Is absorption faster than amalgamation in execution?
It can be, as there's no need to create a new entity.
Shumaila Saeed
Jan 17, 2024
What is the key difference in the outcome of amalgamation vs absorption?
Amalgamation results in a new entity, while absorption maintains the identity of the absorbing entity.
Shumaila Saeed
Jan 17, 2024
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About Author
Written by
Shumaila SaeedShumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.
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