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Merger or amalgamation may take two forms:

Absorption
Absorption is a combination of two or more companies into an existing company. All companies lose their separate identities in a merger through absorption.
An e.g. of this type of merger is the absorption of Tata Fertilisers Ltd. (TFL) by Tata chemicals Ltd. (TCL). TCL an acquiring company survived after the merger while TFL an acquired company ceased to exist. TFL transferred its assets and liabilities and shares to TCL.

Consolidation
A consolidation is a combination of two or more companies into a new company. In this form of merger all companies are legally dissolved and a new entity is created. In a consolidation the acquired company transfers its assets and liabilities and shares to the acquiring company for cash or exchange of shares. For e.g. merger or amalgamation of Hindustan Computers Ltd., Hindustan Instruments Ltd., Indian software company Ltd. and Indian Reprographics Ltd. in 1986 to an entirely new company called HCL Ltd.

Types of Mergers

Demergers

Like their opposite - mergers - demergers tend to go in and out of fashion. When share prices are rising, companies like to use their 'paper' (i.e. shares) to acquire other companies, so their advisers encourage merger activity. In a market of falling prices, mergers and IPOs are less popular, and the merchant banks who earn their fees from corporate activity will start to look at demerger possibilities for their clients.

Cross Border Mergers

The government is set to allow mergers of Indian companies with foreign companies. The demand made by a section of minority shareholders that the government should appoint the valuer for companies planning to merge. Instead, the paper has said, it would be mandatory on both the merging and the transferee company to get their shares/ assets valued by independent valuers appointed by their respective boards. The boards would ratify the "formal valuation" and the merger negotiations would be on the basis of value fixed by the valuers.

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* Contributed by: -
Prof. M. Guruprasad is Senior Faculty for Economics, Finance and Research, with AICAR Business School Raigad / Mumbai. He has more than 15 years of experience in research and educating / training management students. He was research scholar with the University of Mumbai. Worked as Executive in the Marketing research industry. Also Conducted Workshops and Training programmes. He has published articles in various industry magazines, newspapers and has initiated many discussions on academics.