An Introduction to Type A Forward and Reverse Triangular Tax-Free Mergers
The three basic types of reorganization (Type A, Type B, and Type C) offer rather limited flexibility if the acquiring corporation desires to operate a target corporation 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 corporate shell for non tax reasons. Although this objective could be satisfied by a Type B reorganization, the difficult “solely for voting stock” requirement may be an obstacle if P wants to utilize non voting stock as consideration or if a significant number of T shareholders are unwilling to accept any class of P stock. An A reorganization may also not be feasible in all cases. Suppose that P does not wish to incur the risk of T’s…