MERGER
12 May 2016 By PDSNETThis occurs where two or more companies come under the control of one, whose shareholders then become the shareholders of the companies that were merged. The Companies Act (71 of 2008) uses the term "Amalgamation" and defines it as "a transaction, or series of transactions, pursuant to an agreement between two or more companies, resulting in—(a) the formation of one or more new companies, which together hold all of the assets and liabilities that were held by any of the amalgamating or merging companies immediately before the implementation of the agreement, and the dissolution of each of the amalgamating or merging companies; or (b) the survival of at least one of the amalgamating or merging companies, with or without the formation of one ore more new companies, and the vesting in the surviving company or companies, together with such new companies, of all of the assets and liabilities that were held by any of the amalgamating or merging companies immediately before the implementation of the agreement Sometimes one of the two merged companies is used as a vehicle for the merger, and sometimes a totally new company is formed for this purpose." The benefits of merging are to increase the combined companies' marketing reach by enabling them to cross-market their products, to achieve economies of scale, and to increase the size of the total business to enable them to obtain the "scale" necessary to attract investment or take on much larger contracts. Mergers of above a certain size must be notified to the Competition Commission. In terms of the Competition Act (89 of 1998) "a merger occurs when one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another firm". A merger is seen as distinct from a "take-over" or an "absorption".
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