Demystifying International Forward and Reverse Tax-Free Mergers
By Anthony Diosdi The three basic types of reorganizations (Type A, Type B, and Type C) offer rather limited flexibility if the acquiring corporation desires to operate the target as a wholly owned subsidiary. Assume, for example, that Parent Corporation (“P”) wishes to acquire Target Corporation (“T”) and keep T’s business in a separate corporation entity for reasons not related to tax. Although this objective may be met by a Type B reorganization, the Type B reorganization requirement of “solely for voting stock” requirement might be too much of a hurdle to overcome. Even the flexibility A reorganization may not always be feasible for non-tax reasons. For example, if P wishes to acquire T’s assets in a tax-free acquisitive reorganization, it may be unwilling to incur the risk of T’s…