Merger Structure Rundown: Forward Triangular Merger
As Phil Jackson showed, triangles can be a very powerful tool for winning championships. They are also the basis for two successful merger strategies. Perhaps if Phil Jackson was not a coach, he would have been a successful M&A advisor. In today’s update, we look at the Forward Triangular Merger.
A forward triangular merger involves the Purchasing company (the “Purchaser”) acquiring the Selling company (the “Seller”) through a subsidiary company (the “Subsidiary”) that is wholly owned by the Purchaser. Post-acquisition the Seller disappears and the Subsidiary is all that remains.
- Tax – The Purchaser can use a combination of cash and stock (up to 50%) to acquire the Seller through the Subsidiary. This can provide tax benefits for the Purchaser.
- Liability – Because the Seller is acquired through a subsidiary, there is a liability shield in place to provide protection for the Purchaser from pre-acquisition issues of the Seller.
- Third Party Consents – The Purchaser usually has to get third-party consents for any contracts that the Seller had in place.
Below are some good overviews of the different transaction structures (repeat from last week):
- M&A 101 – The difference between mergers and acquisitions
- Making Mergers, Acquisitions and Other Business Combinations Work
- Acquisition Structure – General Framework
Here are some other items of interest:
- Economic Review: March 2023 – Silvercrest (silvercrestgroup.com); Thanks to Sean O’Dowd for sharing
- NFIB – Higher Minimum Wage, More Paid Leave, Lower Taxes: Key Issues in State Legislatures Across the Country
- NFIB + PACB Annual Economic Forum – March 6; 10am-12pm
- Smart Business Dealmakers Conference – April 26, 2023 (thanks to Murphy McCormack Capital Advisors for sharing)
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:
- Merger Structure Rundown: Forward (Direct) Merger
- Merger Structure Rundown: Reverse Triangular Strategy
- Merger Structure Rundown: 338 Elections
As always, please don’t hesitate to email myself (firstname.lastname@example.org), Andy Miller (email@example.com), Christian Miller (firstname.lastname@example.org), Erik Spurlin (email@example.com), Brad Leber (firstname.lastname@example.org) or anyone in our office with questions or comments.
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