Reverse Triangular Merger


DEFINITION of 'Reverse Triangular Merger'

The formation of a new company that occurs when an acquiring company creates a subsidiary, the subsidiary purchases the target company and the subsidiary is then absorbed by the target company. A reverse triangular merger is considered to be simpler to accomplish than a direct merger because the subsidiary only has one shareholder - the acquiring company. Another advantage of a reverse triangular merger is that the acquiring company is able to obtain control of the target's non-transferable assets and contracts. This is not always possible with a forward triangular merger.

BREAKING DOWN 'Reverse Triangular Merger'

Reverse triangular mergers, like direct mergers and forward triangular mergers, can be either taxable or nontaxable depending on how they are executed and other complex factors set forth in Section 368 of the Internal Revenue Code. If nontaxable, a reverse triangular merger is considered a reorganization for tax purposes.

  1. Vertical Merger

    A merger between two companies producing different goods or services ...
  2. Horizontal Merger

    A merger occurring between companies in the same industry. Horizontal ...
  3. Acquisition

    A corporate action in which a company buys most, if not all, ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies ...
  6. Forward Triangular Merger

    The acquisition of a target company by a subsidiary of the purchasing ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Investing Basics

    The Merger - What To Do When Companies Converge

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

    Key Players In Mergers And Acquisitions

    Strategic acquisition is becoming a part of doing business. Discover the different types of investor groups involved.
  4. Forex Education

    Mergers & Acquisitions: An Avenue For Profitable Trades

    When major corporate transactions have a big impact on the currency markets, you can benefit.
  5. Investing

    A Guide To Spotting A Reverse Merger

    This corporate action can be profitable for investors who know what to look for.
  6. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  7. Stock Analysis

    Is There Any Upside Left for Walgreens?

    Walgreens is about to get much bigger, but does bigger equal better in this case?
  8. Stock Analysis

    Top 10 Companies Owned by Amazon

    Learn about what has made Amazon so successful over the years. Learn about 10 of the most important companies that Amazon has acquired.
  9. Fundamental Analysis

    ABInBev and SABMiller Merger: The Facts

    Beer is a big business. In the United States, beer sales generated more that $101 billion in revenue.
  10. Investing News

    Does the Dell/EMC Deal Make Financial Sense?

    Last week, Dell announced it would be buying IT provider EMC in a $67 billion deal, making it the largest technology deal ever.
  1. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  2. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  3. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  4. How is a tender offer used by an individual, group or company seeking to purchase ...

    A tender offer is made directly to shareholders in a publicly traded company to gain enough shares to force a sale of the ... Read Full Answer >>
  5. How does a company record profits using the equity method?

    A company that invests in another company and has majority control of it would record profits using the equity method. This ... Read Full Answer >>
  6. How does horizontal integration allow companies to share resources?

    In a horizontal integration, a company either acquires another company or merges with that company. This allows the resulting ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center