Series 79 practice questionmediumMerger Types
In a reverse triangular merger, which entity survives the transaction?
- AThe target company✓ Correct answer
- BThe acquiring company's newly formed subsidiary
- CThe acquiring parent company
- DNeither entity survives; a new entity is formed
Explanation
Why A — The target company
In a reverse triangular merger, the acquirer forms a subsidiary that merges into the target company, with the target surviving as a subsidiary of the acquirer. This structure is advantageous because it preserves the target's contracts, licenses, and legal identity. It is one of the most common acquisition structures used in M&A because it avoids the need to obtain third-party consents for assignment of contracts.
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