Forward Triangular Merger

DEFINITION of 'Forward Triangular Merger'

The acquisition of a target company by a subsidiary of the purchasing company. The only difference between a forward triangular merger and a direct merger is that a subsidiary of the purchasing company, not the purchasing company itself, is the entity that acquires the target. Forward triangular mergers, like direct mergers and reverse triangular mergers, can be either taxable or nontaxable, depending on how they are executed and other complex factors.

BREAKING DOWN 'Forward Triangular Merger'

In a taxable forward triangular merger, the subsidiary buys 100% of the target's shares and the target's shareholders receive cash in exchange. In a nontaxable forward triangular merger, also known as a tax-free reorganization, the target's shareholders are compensated at least 50% in shares of the acquiring company. This gives the target's shareholders a continuing interest in the post-merger company and satisfies one of the key criteria for a tax-free reorganization.



RELATED TERMS
  1. Reverse Triangular Merger

    The formation of a new company that occurs when an acquiring ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies ...
  3. Merger Of Equals

    The combination of two firms of about the same size to form a ...
  4. Merger Mania

    A period of time with significant merger and acquisition activity ...
  5. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  6. Merger

    The combining of two or more companies, generally by offering ...
Related Articles
  1. Investing

    What Investors Can Learn From M&A Payment Methods

    How a company pays in a merger or acquisition can reveal a lot about the buyer and seller. We tell you what to look for.
  2. Investing

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  3. Investing

    The Merger: What To Do When Companies Converge

    Mergers occur when it’s beneficial for two companies to combine business operations. The question is; if you’re invested in a company that’s involved in a merger, will it benefit you?
  4. Investing

    A Guide To Spotting A Reverse Merger

    This corporate action can be profitable for investors who know what to look for.
  5. Investing

    What Merger And Acquisition Firms Do

    The merger or acquisition process can be intimidating. This is why merger and acquisition firms step in to facilitate the process.
  6. Investing

    Reverse Mergers: The Pros And Cons

    Reverse mergers can provide excellent opportunities for companies and investors, but there are still some downsides and risks.
  7. Investing

    What's a Merger?

    Mergers are not the same as acquisitions. In an acquisition, one company buys and subsumes another company, leaving only the buyer in place. In most mergers, both companies merge to form an entirely ...
  8. Investing

    How To Profit From Mergers And Acquisitions Through Arbitrage

    Making a windfall from a stock that attracts a takeover bid is an alluring proposition. But be warned – benefiting from m&a is easier said than done.
  9. Investing

    What's a Subsidiary?

    A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by ...
  10. Investing

    What's a Horizontal Merger?

    A horizontal merger occurs when companies within the same industry merge.
RELATED FAQS
  1. How long does it take for a merger to go through?

    Corporate mergers and acquisitions can vary considerably in the time they take to be completed. There are a number of individual ... Read Answer >>
  2. How does a merger affect the shareholders?

    Explore the effect of a merger and understand how the process affects shareholders of the newly merged firm in terms of stock ... Read Answer >>
  3. How can I develop a profitable merger arbitrage strategy?

    Learn how to utilize a simple merger arbitrage trading strategy to profit from the typical temporary price discrepancies ... Read Answer >>
  4. What is the difference between a merger and a takeover?

    In a general sense, mergers and takeovers (or acquisitions) are very similar corporate actions - they combine two previously ... Read Answer >>
  5. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    Learn about mergers and acquisitions and how these two corporate actions differ based on the size and participation of the ... Read Answer >>
  6. What is the difference between a merger and an acquisition?

    Read about the legal and practical differences between a corporate merger and corporate acquisition, two terms often used ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center