Difference

when 2 or more companies doing similar business go in liquidation and a new company is formed to take over their businesses it is known as amalgamation .

It is similar to amalgamation though not exactly the same.In external reconstruction a new company is formed  for the purpose of taking over the business of an existing sick company which has incurred huge losses and is facing financial difficulties. Existing company is wound up by selling its business to the newly formed company which is generally similarly named and owned by the same shareholders to a great extent