Subsidiary mergers are divided into following −
First, let us learn about the forward triangular merger.
In a forward triangular merger, the company acquires another company through its subsidiary company.
This type of merger is also called indirect merger.
In this, a combination of cash and stock is used for financing. If only cash is used, that amount is taxable.
The advantages of forward triangular merger are as follows −
The disadvantages of forward triangular merger are as follows −
Reverse triangular merger is similar to forward triangular merger in the process of acquiring, but the only difference is that an acquired entity is liquidated.
In this, a subsidiary has a subsidiary and gains control over assets and contracts.
Depending on financial structure (cash or stock), it can be taxable or non-taxable.
In this, there are three parties, which are subsidiary company, parent company and targeted company.
The advantages of reverse triangular merger are as follows −
The disadvantages of reverse triangular merger are as follows −