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What does consolidation mean?

Multi-ethnic group of business persons sitting around a desk and talking

Introduction to business consolidation

The word consolidate means to bring together separate parts into a unified whole. Business consolidation is the act of combining many separate businesses into one single, unified business. A consolidated business is more effective and efficient in its operations. Reducing redundant personnel and processes allows a business to become more cost effective in its daily operations. It can also lead to a business raising more revenue .Consolidation happens when two or more businesses merge and become one which is also known as an amalgamation.

Why do businesses consolidate?

Consolidation is the main option for businesses who are looking to cut costs and expand their operations. A major reason why businesses consolidate is because they sometimes run into financial hiccups which they are not able to solve on their own. Not all businesses consolidate for this reason as some businesses are always looking for ways in which they can expand their businesses and earn more prophet.

Types of Business consolidations

  • Statutory Consolidation- Whenever businesses are combined together the original companies will cease to exist . The combination of these businesses allows the companies to form a larger cooperation.
  • Statutory Merger- This occurs when the company which acquires other businesses liquifies the assets of those businesses it buys. The company which has acquired these companies then incorporates or dismantles the operations of the businesses it buys.
  • Stocks Acquisition- This occurs when a company buys majority shares or a controlling interest of another company. The acquiring company needs more than 50% shares in order to acquire a controlling interest in the company it buys shares from.
  • Variable Interest Entity- A variable interest is when a acquiring company that owns majority interest in a business does not nave majority voting rights

So now you have an example of what consolidation is and how it affects the operations of businesses.

Written by odanemorgan

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