M&A Boot Camp booklet 2023 - Flipbook - Page 32
C.
Merger
1.
Types of mergers
a.
“Straight” forward merger – the target company merges directly
into the acquirer
b.
“Forward subsidiary” merger – the target company merges into a
newly-formed subsidiary of the acquirer
c.
“Reverse subsidiary” merger – a newly-formed subsidiary of the
acquirer merges into the target company; the target company
becomes a wholly-owned subsidiary of the acquirer
d.
Other types of mergers
2.
Requires approval of the holders of at least a majority of the outstanding
target company shares (and, in certain cases involving a “straight” forward
merger or the issuance of stock by the acquirer, approval of the holders of
at least a majority of the outstanding shares of the acquirer); the target
company’s stockholders (and in certain cases, the stockholders of the
acquirer) who do not vote in favor of the merger may have statutory
“appraisal” or “dissenters’“ rights, allowing them to demand and receive
the appraised value of their shares in cash
3.
The acquirer assumes responsibility (directly in a “straight” forward
merger and indirectly in a “forward subsidiary” or “reverse subsidiary”
merger) for all of the target company’s liabilities to third parties, including
unknown liabilities
4.
There is a direct assignment of the target company’s contracts and
governmental permits to the acquirer in a “straight” forward merger and to
the acquirer’s newly-formed subsidiary in a “forward subsidiary” merger
(which may increase the likelihood that third-party or governmental
consents will have to be obtained); there is no such direct assignment in a
“reverse subsidiary” merger (which may reduce the likelihood that thirdparty or governmental consents will have to be obtained)
5.
As a general matter, the federal income tax consequences of a “straight”
forward or a “forward subsidiary” merger are similar to those of a
purchase of assets; and the federal income tax consequences of a “reverse
subsidiary” merger are similar to those of a stock purchase
\NORTHCA - 703480/000300 - 2771781 v1
3