Amalgamation Vs. Acquisition

Amalgamation refers to the process of merger or consolidation of two or more business units into a single large unit.  In Amalgamation, a new entity is formed.

Key Points

• After amalgamation, the newly formed entity will have a larger capital base, more resources, large customer outreach, and new markets.
• This process helps to increase resources, cash flow, reduces competition, etc.
• The merger of the Associate Banks of SBI and Bharatiya Mahila Bank with State Bank of India is an example of Amalgamation.

What is an Acquisition?

Acquisition refers to the process of taking over the business and assets of one company by another company. The buying company become gains ownership and the taken over company ceases to exist.

Key Points

• In Acquisition, the buyer purchases over 50% shares of the other company.
• This process is initiated by the buyer company with or without the consent of the other company.
• Union Bank of India taking over Sikkim Bank Ltd is an example of Acquisition.

Madras High Court gives relief to Lakshmi Vilas Bank Stakeholders

The Madras High Court has given directions in an interim order to safeguard the interests of the stakeholders of Lakshmi Vilas Bank (LVB). RBI had put LVB in a moratorium of 30 days and approved the amalgamation of LVB in the DBS India Bank and the amalgamation is completed. All the branches of LVB will now be known as DBS Bank India branches.

As per the interim order by the court, that no further prejudicial action should be taken against the shareholders of LVB by the respondents. Also, the court directed DBS Bank to give an undertaking in the Court to provide compensation to the stakeholders if directed by the court. DBS Bank should also create a reserve fund equal to the face values shares of LVB and maintain it till further orders.