QS Study

Definition of Business Combination

In general sense ‘Combination’ means an association of some business enterprise for enjoying some economic benefits. So one or more business organizations desire to or make a combination under same management to earn more profit. It may be formal or informal in nature. These types of combination are called business combination. By business combination, same interested business persons can reduce unnecessary competition and earn more profit, contain the supply of new materials, enjoy monopoly business benefits, large business facilities and control the production. A business combination may be permanent or temporary.

Some writers give their opinion about business combination are given bellows:

  • H. Hancy: “To combine is to become one of the parts of a whole, and the combination is merely a union of persons to make a whole or group for the prosecution of some common purpose.”
  • K. Sharma and G.K. Gupta: “Business combination is a method of economic organization by which a common control of greater or lesser completers is exercised over a number of firms which either one operating in competition or independently.”
  • C. Shukla: “A combination is said to exist when two or more units are operated or controlled by one ownership interest.”
  • New world dictionary: “Combination means integration of an organization to achieve a common purpose”

From the discussion, we can say that, when two or more business unit combines for some economic benefits, combination comes into existence. The main objective of forming a combination is to maximize profits in one way or other ways. To combine does not indicate that the entities of business enterprises shall be merged its one business unit.