- In a merger transaction, the acquirer will have to get the vote of approval of the shareholders of the acquired company. A reverse triangular merger involves the approval of a fewer number of shareholders than a typical merger does, which makes for a faster merger execution. Since the target company continues in existence, the reverse triangular merger involves the assent of a fewer number of third parties than a regular merger does. This too helps move the transaction forward faster.
- Certain situations exist in which the target company has been in business for a while and built up a number of good business prospects and contracts. The reverse triangular merger format helps the acquiring company hold on to these contracts. In case the target company does not continue in business after acquisition, the acquiring company may not be able to enforce its contracts.
- By not directly acquiring the target company, the acquiring company also maintains a distance from the liabilities of the target company. Since the target company becomes a subsidiary of the acquiring company, the acquirer does not have a direct exposure to the subsidary's liabilities. This affords better protection to the assets of the acquiring company.
- Sometimes, after a merger goes through, the acquiring company realizes that it made a mistake. In this sort of situation, it is easier to sell off the acquired company if it is a subsidiary of the acquirer. It is more difficult to go through the process if the acquired company fully integrated into the acquiring company.
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