Merger Structure Rundown: Forward (Direct) Merger

March 03, 2023

As promised, I am spending the next few updates highlighting different merger structures.  In case you did not know (and trust me it is not something you read on a daily basis), the three main merger structures are a Forward (Direct) merger, a Forward Triangular Merger and a Reverse Triangle Merger.  I think the creator of these structures may have either moonlighted as a spiritual advisor or spent time in battle, but what do I know.

Below is a rundown of the Forward (Direct) Merger:
A forward merger involves the Selling company (the “Seller”) merging directly into the acquiring company (the “Purchaser”).  The Seller ceases to exist post-closing and the two companies become a single entity under the Purchaser’s name and structure.

It is very simple. It is tax friendly for the Purchaser because it is usually treated as an asset acquisition.  Therefore, the Purchaser gets a step-up in basis on the Seller’s assets equal to the purchase price.  In layman’s terms, it means that in addition to the larger depreciation deductions available, any future sale of the Seller’s assets would result in a smaller tax liability.

Double taxation is still a risk.  First, the transaction is taxed at the corporate level and then again at the shareholder level.  The Purchaser is generally not shielded from the liabilities of the Seller.
The Purchaser usually has to get third-party consents for any contracts that the Seller had in place.
Here are some other useful M&A Articles:

Here are some other items of interest:

Additional Merger Structure Rundowns

This blog post is part of a series on different types of merger structures. You can find the other structure rundowns at the links below:

As always, please don’t hesitate to email myself (, Andy Miller (, Christian Miller (, Erik Spurlin (, Brad Leber ( or anyone in our office with questions or comments.  

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