Amalgamation

Definition:
The combination of one or more companies into a new entity. An amalgamation is distinct from a merger because neither of the combining companies survives as a legal entity. Rather, a completely new entity is formed to house the combined assets and liabilities of both companies. The merging of two things together to form one, such as the amalgamation of different companies to form a single company.

Advantages of amalgamation:
1. 2. 3. 4. 5. 6. 7. 8. Reduce competition. Tax benefits. Increase in market price of stocks. Increase Brand Value. Helps entering a new market Lower the labor cost through staff reductions Provide new technology. Revival of a sick or week company

There are three types of business amalgamations:

Statutory Merger which means that a business combination results in the insolvency of all the companys resources and also the continued existence of the buying company. Statutory Consolidation involves a business merger which forms a brand new company where none of the preceding businesses survive. Stock Acquisition occurs when a business amalgamation wherein the purchasing business obtains the majority of over fifty percent of the ordinary stocks of the obtained company and they are able to survive equally.

Reasons of amalgamation:
The following are the other important reasons for mergers or amalgamations:

1. Economies of scale. An amalgamation company will have more reasons at its command that the individual companies. This will help in increasing the scale of operations and the economies of large scale will be available. These economies will occur because of more intensive utilization of production

facilities, distribution network, research and development facilities, etc. these economies will be available in horizontal mergers were scope of more intensive use of resources is greater.

2. Operating economies: A number of operating economies will be availed with the merger of two or more companies. Duplicating facilities in accounting, purchasing, marketing, etc. will be eliminated. Operating inefficiencies of small concerns will be controlled by the superior management emerging from the amalgamation. The amalgamated company will be in a better position to operate than the amalgamating companies individually. 3. Synergy: Synergy refers to the greater combined value of merged firms than the sum of the values of individual units. It is something like one plus one more than two. It results from benefits other than those related to economies of scale. Operating economies are one of the various synergy benefits of merger or consolidation. The other instances which may result into synergy benefits includes, strong R&D facilities of one firm merged with better organized facilities of another unit, enhanced managerial capabilities, the substantial financial resources of one being combined with profitable investment opportunities of the other. 4. Growth: A company may not grow rapidly throw internal expansion. Merger or amalgamation enables satisfactory and balanced growth of a company. It can cross many stages of growth at one time through amalgamation. Growth through merger or amalgamation is also cheaper and less risky. A number of costs and risk of expansion and taking.

For further explanation of amalgamation we have studied two companies which have been amalgamated and formed a new company. Companies name: Ericsson with sony Dhan fabrics into Dewan slman fabrics.

Sony Ericsson Ericsson:

Ericsson is one of Sweden's largest companies, is a provider of telecommunications equipment and data communication systems, and related services, covering a range of technologies, including especially mobile networks. Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world.

Sony:
Sony, one of the worlds leading brands for the electrical appliance market currently holds their headquarters in Tokyo Japan. Sony currently is one of the worlds biggest organisations for manufacturing audio, IT products as wells Visual electrical appliance to service and cater both the public and commercial markets. There are currently 928 consolidated Sony subsidiaries operating around the world. With their annual sales reaching $67 billion US Dollars in 2005, they employ over 150 000 people world wide. Sony Corporation is a leading manufacturer of audio, video, game, communications and information technology products for the consumer and professional markets. With its music, pictures, computer entertainment and on-line businesses, Sony is uniquely positioned to be a leading personal broadband entertainment company in the world. Sony recorded consolidated annual sales of nearly US$ 60 billion for the fiscal year ended March 31, 2001.

Sony ericsson:
Introduction: Sony Mobile Communications AB (formerly Sony Ericsson Mobile Communications AB) is a multinational mobile phone manufacturing company headquartered in London, United Kingdom and a wholly owned subsidiary of Sony Corporation. It was founded on October 1, 2001 as a joint venture between Sony and the Swedish telecommunications company Ericsson. Sony acquired Ericsson's share in the venture on February 16, 2012. Sony Mobile Communications has research and development facilities in Lund, Sweden; Tokyo, Japan; Beijing, China; and Silicon Valley, United States. In 2009, it was the fourth-largest mobile phone manufacturer in the world (after Nokia, Samsung and LG). By 2010, its market share had fallen to sixth place.

Reason of amalgamation:
In the United States, Ericsson partnered with General Electric in the early nineties, primarily to establish a US presence and brand recognition. Ericsson had decided to obtain chips for its phones from a single sourcea Philips facility in New Mexico. In March 2000, a fire at the Philips factory contaminated the sterile facility. Philips assured Ericsson and Nokia (their other major customer) that production would be delayed for no more than a week. When it became clear that production would actually be compromised for months, Ericsson was faced with a serious shortage. Nokia had already begun to obtain parts from alternative sources, but Ericsson's position was much worse as production of current models and the launch of new ones was held up. Ericsson, which had been in the mobile phone market for decades, and was the world's third largest cellular telephone handset maker, was struggling with huge losses. This was mainly due to this fire and its inability to produce cheaper phones like Nokia. To curtail the losses, it considered outsourcing production to Asian companies that could produce the handsets for lower costs. Speculation began about a possible sale by Ericsson of its mobile phone division, but the company's president said it had no plans to do so. "Mobile phones are really a core business for Ericsson. We wouldn't be as successful (in networks) if we didn't have phones", he said. Sony was a marginal player in the worldwide mobile phone market with a share of less than 1 percent in 2000. By August 2001, the two companies had finalized the terms of the merger announced in April. The company was to have an initial workforce of 3,500 employees. Other reasons:

Purchase consideration:
Purchase consideration was agreed to be paid by the method of lum sum payment. Sony paid Ericsson a lum sum amount of $250 as purchase consideration.

Progress after amalgamation:

In its first five years, Sony Ericsson established itself as a serious player in the mobile phone market. But for the next five years, it wanted to go much further: to become a global iconic brand, which would lead thinking in mobile phones, seize 15% of the market, and become one of the top three in the industry. The new language was launched in autumn 2006. Within three months, consumers were seeing Sony Ericsson differently: around the world, spontaneous awareness and purchase consideration scores shot up. In just six months, Sony Ericsson sold 60 million of its

newly branded Walkman handsets. Sony Ericssons sales doubled within 2 years: 104 million handsets were sold in 2007. In 2008 Sony Ericsson became the third largest mobile phone manufacturer in the world.

Business strategies from 2001 to present:

2002: Following the creation of the joint venture, Ericsson's market share actually fell, and in August 2002, Ericsson announced that it would cease making mobile phones and end its partnership with Sony if the business continued to disappoint. 2003: However, in January 2003, both companies said they would inject more money into the joint venture in a bid to stem the losses. Sony Ericsson's strategy was to release new models capable of digital photography as well as other multimedia capabilities such as downloading and viewing video clips and personal information management capabilities. To this end, it released several new models which had built-in digital camera and colour screen which were novelties at that time. The joint venture, however, continued to make bigger losses in spite of booming sales. The target date for making a profit from its first year to 2002 was postponed to 2003 to second half of 2003. 2005: It failed in its mission of becoming the top seller of multimedia handsets and was in fifth-place and struggling in 2005. On March 1, 2005, Sony Ericsson introduced the K750i with a 2 megapixel camera, as well as its platform mate, the W800i, the first of the Walkman phones capable of 30 hours of music playback, and two low-end phones. On May 1, 2005, Sony Ericsson agreed to become the global title sponsor for the WTA Tour in a deal worth $88 million US dollars over 6 years. The women's pro tennis circuit was renamed the Sony Ericsson WTA Tour. Just over a month later on June 7, it announced sponsorship of West Indian batsmen Chris Gayle and Ramnaresh Sarwan. In October 2005, Sony Ericsson presented the first mobile phone based on UIQ 3, the P990. 2007: In 2007 the company's first 5-Megapixel camera phone, the Sony Ericsson K850i, was announced followed in 2008 by the Sony Ericsson C905, the world's first 8-Megapixel phone. At Mobile World Congress 2009, Sony Ericsson unveiled the first 12-Megapixel phone, named Satio, on May 28, 2009.

On January 2, 2007, Sony Ericsson announced in Stockholm that it would have some of its mobile phones made in India, and that its two outsourcing partners, Flextronics and Foxconn would manufacture ten million mobile phones per year by 2009. CEO Miles Flint announced at a press conference held with India's communications minister Dayanidhi Maran in Chennai that India was one of the fastest growing markets in the world and a priority market for Sony Ericsson with 105 million users of GSM mobile telephones. Sony Ericsson struggled following the launch of Apple's iPhone in the third quarter of 2007. 2008: Sony Ericsson was overtaken by its South Korean rival LG Electronics in Q1 2008. Sony Ericsson's company's profits fell significantly by 43% to 133 million (approx. US$180 million), sales falling by 8% and market share falling from 9.4% to 7.9%, despite favorable conditions that the handset market was expected to grow by 10% in 2008. Sony Ericsson announced another profit warning in June 2008 and saw net profit crash by 97% in Q2 2008, announcing that it would cut 2,000 jobs, leading to wide fear that Sony Ericsson is on the verge of decline along with its struggling rival, Motorola. In Q3 the profits were much on the same level, however November and December saw increased profits along with new models being released such as the C905 being one of the top sellers across the United Kingdom. In June 2008, Sony Ericsson had about 8,200 employees, it then launched a cost-cutting program and by the end of 2009 it had slashed its global workforce by around 5,000 people. 2010 to present: On October 27, 2011, Sony announced that it would acquire Ericsson's stake in Sony Ericsson for 1.05 billion ($1.47 billion), making the mobile handset business a wholly owned subsidiary of Sony. The transaction's completion was expected to occur in January 2012. At their keynote at the 2012 Consumer Electronics Show, Sony's Kaz Hirai announced that Sony Ericsson would be known simply as Sony Mobile Communications pending completion of the transaction. On January 26, 2012, The European Union approved the buyout. On February 16, 2012, Sony announced it had completed the full acquisition of Sony Ericsson. The first Sony only mobile is the Sony Xperia S launched at the 2012 Consumer Electronics Show. Sony Mobile Communications has decided to phase out all the feature (non-smart) phones by September 2012 and focus on smartphones segment.

References:
1. 2. 3. 4. 5. http://www.ericsson.com/press http://www.sony.net/ http://en.wikipedia.org/wiki/Sony_Mobile_Communications http://www.mobilenext.co.uk/phones/Sony-Ericsson-mobile-p... http://www.findpk.com/YP/A-Z-Products-Services-Listed-on-Yellow-Pages-of-PakistanAlpha 6. http://www.pakistaneconomist.com/database2/cover/c96-69.asp 7. http://www.dhanfabrics.com.