A
Diagrams of Deal Structures
to Be Analyzed
Diagram 1:
Traditional Form of Stock for Stock Direct (Statutory) Merger
Diagram 2:
Stock for Cash Merger (Cash Out merger)
Diagram 3:
Short Form Merger
Diagram 4:Traditional Form of Asset Purchase for Cash: Sale of Substantially
All of Target Co. Assets for Cash, Followed by Dissolution of
Target Co.
Diagram 5:
Asset Acquisition for Stock
Diagram 6:
Traditional Form of Stock Purchase for Cash
Diagram 7:Stock for Stock Acquisition (Stock Purchase for Stock — Stock
Exchange Offer)
Diagram 8:
Forward Triangular Merger (Using Stock as Merger Consideration)
Diagram 9:
Forward Triangular Merger (Using Cash as Merger Consideration)
Diagram 10:
Reverse Triangular Merger (Using Stock as Merger Consideration)
Diagram 11:
Reverse Triangular Merger (Using Cash as Merger Consideration)
Diagram 12:TWO-STEP TRANSACTION: Stock Purchase, Followed by Squeeze
Out/Cash Out Merger (Using Either a Reverse or a Forward
Triangular Merger)
813
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A.
Diagrams
DIAGRAM 1
Traditional Form of Stock for Stock Direct (Statutory) Merger
• BEFORE Transaction •
Board of Directors
Shareholders
B Co. Shareholders
Target Co.
Assets &
Liabilities
Bidder Co.
Assets &
Liabilities
Board of Directors
• The Transaction •
T Co. Shareholders
[T Co. shares are
cancelled — by
operation of law]
Bidder Co. Shareholders
B Co. Shares
Target Co.
Bidder Co.
T Co. Assets & Liabilities
(by operation of law)
[Target Co. disappears —
by operation of law]
[Bidder Co. is surviving corporation —
by operation of law]
• AFTER Transaction •
Bidder Co.
Old B Co. Assets &
Liabilities — plus old T
Co. Assets & Liabilities
Shareholders
(consisting of Bidder Co.’s old shareholders
plus old T Co. shareholders)
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A.
Diagrams
815
DIAGRAM 2
Stock for Cash Merger
(Cash Out Merger)
• BEFORE Transaction •
Board of Directors
T Co. Shareholders
Target Co.
Assets &
Liabilities
B Co. Shareholders
Bidder Co.
Assets &
Liabilities
Board of
Directors
• The Transaction •
T Co. Shareholders
Target Co.
Assets &
Liabilities
B Co. Shareholders
Cash
T Co. Assets & Liabilities
Bidder Co.
Assets &
Liabilities
[Bidder Co. is
surviving
corporation]
[Target Co. disappears — extinguished by operation of law]
• AFTER Transaction •
Old B Co. Shareholders
[Old Target Co. shareholders
hold cash — no stock]
Bidder Co.
Old B Co. Assets &
Liabilities — plus old T
Co. Assets & Liabilities
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A.
Diagrams
DIAGRAM 3
Short Form Merger
• BEFORE Transaction •
B Co. Shareholders
Board of Directors
Bidder Co.
Assets &
Liabilities
90%
T Co. Shareholders
10%
Board of Directors
Target Co.
Assets &
Liabilities
• The Transaction •
B Co. Shareholders
[Bidder Co. is surviving
corporation]
Bidder Co.
Assets &
Liabilities
Cash
T Co. Assets
& Liabilities
90%
10%
[All T Co. shares are
cancelled — by operation
of law]
Target Co.
Assets &
Liabilities
T Co. Shareholders
[Target Co. disappears —
extinguished by operation of law]
• AFTER Transaction •
Old B Co. Shareholders
Bidder Co.
Old B Co. Assets &
Liabilities — plus old T
Co. Assets & Liabilities
[Old minority shareholders of T Co.
have been cashed out — hold no stock]
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A.
Diagrams
817
DIAGRAM 4
Traditional Form of Asset Purchase:
Sale of Substantially All of Target Co. Assets for Cash, Followed by
Dissolution of Target Co.
• BEFORE Transaction •
Board of Directors
Board of Directors
T Co. Shareholders
Bidder Co.
Assets &
Liabilities
Target Co.
Assets &
Liabilities
B Co. Shareholders
• FIRST Step: Sale of Target Co. Assets to Bidder Co. •
T Co. Shareholders
Target Co.
B Co. Shareholders
“Substantially All” of T Co. Assets
Bidder Co.
Cash (plus assumption of T Co.
liabilities as agreed to by parties)
• AFTER Sale of Substantially All of Target Co. Assets •
Board of Directors
Old T Co. Shareholders
Old B Co. Shareholders
Target Co.
Remaining
Liabilities
plus Cash
Bidder Co.
Old B Co. Assets & Liabilities
plus T Co. Assets and any
assumed T Co. Liabilities
• SECOND Step: Dissolution of Target Co. •
Board of Directors
T Co. Shareholders
[T Co. stock is cancelled
(by operation of law) &
T Co. dissolves, (to be
extinguished by
operation of law) ]
Target Co.
Cash
Remaining Liabilities
— plus Cash
(proceeds from sale
of assets)
B Co. Shareholders
Bidder Co.
B Co. Assets &
Liabilities — plus All of T
Co. Assets (& any
assumed T Co. Liabilities)
• AFTER Second-Step Dissolution •
B Co. Shareholders
[Target Co. is extinguished;
old T Co. shareholders have been
cashed out following orderly
liquidation of Target Co.]
Bidder Co.
B Co. Assets & Liabilities —
plus all of old T Co. Assets
(& any assumed old T Co.
Liabilities)
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A.
Diagrams
DIAGRAM 5
Asset Acquisition for Stock
• BEFORE Transaction •
Board of Directors
T Co. Shareholders
Board of Directors
Target Co.
Assets &
Liabilities
Bidder Co.
Assets &
Liabilities
B Co. Shareholders
• The Transaction •
T Co. Shareholders
B Co. Shareholders
Target Co.
B Co. Stock
Bidder Co.
T Co. Assets
(plus assumption of T Co.
Liabilities as agreed to by parties)
• AFTER Transaction •
Old T Co. Shareholders
Old B Co. Shareholders
Bidder Co.
Old B Co. Assets &
Liabilities — plus all of old
T Co. Assets & any
assumed T Co. Liabilities
Target Co.
Remaining Liabilities
— plus B Co. Stock
Step 2: Dissolution of Target Co.
• BEFORE Dissolution •
Board of Directors
Old T Co. Shareholders
Target Co.
(Remaining)
Liabilities — plus B
Co. Stock
• The Transaction •
B Co. Stock
Old T Co. Shareholders
[T Co. stock is cancelled by
operation of law]
[T Co. dissolves on
Target Co.
filing of Articles of
Dissolution — extinguished
by operation of law]
• AFTER Dissolution •
Old B Co. Shareholders plus
Old T Co. Shareholders
[T Co. disappears]
Bidder Co.
Old B Co. Assets &
Liabilities plus Old T
Co. Assets & any
assumed T Co. Liabilities
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A.
Diagrams
819
DIAGRAM 6
Traditional Form of Stock Purchase for Cash
• BEFORE Transaction •
Board of Directors
Board of Directors
T Co. Shareholders
Target Co.
Assets &
Liabilities
B Co. Shareholders
Bidder Co.
Assets &
Liabilities
• The Transaction •
T Co. Shareholders
Target Co.
Assets &
Liabilities
B Co. Shareholders
Cash
*(100%)
T Co. Stock
Bidder Co.
Assets &
Liabilities
*It is possible (but often not likely) that all (100%) of Target Co. stock is exchanged for
cash in this transaction.
• AFTER Transaction •
[Old Target Co. shareholders
hold cash — no stock]
Bidder Co.
Old B Co.
Assets &
Liabilities
Old B Co. Shareholders
Board of Directors
100%
Target Co.
Old T Co.
Assets &
Liabilities
Board of Directors
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Diagrams
DIAGRAM 7
Stock for Stock Acquisition
(Stock Purchase for Stock — Stock Exchange Offer)
• BEFORE Transaction •
Board of Directors
T Co. Shareholders
B Co. Shareholders
Target Co.
Assets &
Liabilities
Bidder Co.
Assets &
Liabilities
Board of
Directors
• The Transaction •
T Co. Shareholders
B Co. Shareholders
B Co. Stock
Target Co.
Assets &
Liabilities
*T Co.
Stock
Bidder Co.
Assets &
Liabilities
*This assumes that all (100%) of Target Co. Shareholders accept the offer and exchange
their T Co. shares for B Co. stock.
• AFTER Transaction •
Old B Co. Shareholders plus
Old T Co. Shareholders
[Bidder Co. = Parent Co.]
Bidder Co.
Old B Co.
Assets &
Liabilities
Board of Directors
100%
[Target Co. = wholly owned
Subsidiary]
Target Co.
Old T Co.
Assets &
Liabilities
Board of Directors
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A.
Diagrams
821
DIAGRAM 8
Forward Triangular Merger
(Using Stock as Merger Consideration)
• BEFORE Transaction •
Board of Directors
Target Co.
Assets &
Liabilities
Board of Directors
Bidder Co.
Assets &
Liabilities
T Co. Shareholders
B Co. Shareholders
[Bidder Co.
incorporates
subsidiary (NewCo.)
and receives all of the
stock of NewCo. in
exchange for merger
consideration — which
consists of B Co.
stock.]
100%
NewCo.
(merger
consideration =
B Co. stock)
Board of Directors
• The Transaction •
(Target Co. merges into NewCo.)
Target Co.
Assets &
Liabilities
Old T Co. Shareholders
[T Co. shares are cancelled]
B Co.
[Target Co. disappears —
extinguished by operation
of law]
Bidder Co.
Assets &
Liabilities
Stock
T Co.
Assets
& Liabilities
Old B Co.
Shareholders
100%
NewCo.
[B Co. stock]
[NewCo. is
surviving
corporation —
by operation
of law]
• AFTER Transaction is Completed •
Bidder Co.
Old B Co.
Assets &
Liabilities
Board of Directors
Old B Co. Shareholders plus
Old T Co. Shareholders
100%
NewCo. *
Old T Co.
Assets &
Liabilities
Board of Directors
*NewCo. may undertake the transaction costs associated with changing name to “Target Co.”.
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822
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Diagrams
DIAGRAM 9
Forward Triangular Merger
(Using Cash as Merger Consideration)
• BEFORE Transaction •
Board of Directors
Target Co.
Assets &
Liabilities
Board of Directors
Bidder Co.
Assets &
Liabilities
T Co. Shareholders
B Co. Shareholders
100%
NewCo.
(merger
consideration =
cash)
Board of Directors
[Bidder Co.
incorporates
subsidiary (NewCo.)
& receives all of
NewCo.’s stock in
exchange for cash to
be used as merger
consideration]
• The Transaction •
(Target Co. merges into NewCo.)
Target Co.
Assets &
Liabilities
[Target Co.
disappears —
extinguished
by operation
of law]
Old T Co. Shareholders
Old B Co.
Shareholders
Bidder Co.
Assets &
Liabilities
Cash
T Co. Assets
& Liabilities
[NewCo. is surviving
corporation — by
operation of law]
NewCo.
[Cash]
• AFTER Transaction Is Consummated •
Bidder Co.
Old B Co.
Assets &
Liabilities
Old B Co. Shareholders
100%
NewCo.*
Old T Co.
Assets &
Liabilities
[Old T Co. shareholders have
been cashed out — hold no
stock]
*NewCo. may undertake the transaction costs associated with changing name to “Target Co.”.
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A.
Diagrams
823
DIAGRAM 10
Reverse Triangular Merger
(Using Stock as Merger Consideration)
• BEFORE Transaction •
Board of Directors
Target Co.
Assets &
Liabilities
Board of Directors
Bidder Co.
Assets &
Liabilities
T Co. Shareholders
B Co. Shareholders
100%
NewCo.
(merger
consideration=
B Co. stock)
Board of Directors
[Bidder Co.
incorporates
subsidiary (NewCo.)
& receives all of
NewCo.’s stock in
exchange for B Co.
stock, which will be
used as merger
consideration]
• In the Transaction •
(NewCo. merges into Target Co.)
Target Co.
Assets &
Liabilities
[Target Co. is
surviving
corporation —
by operation
of law]
T Co. Shareholders
[T Co. shares are cancelled]
Bidder Co.
Assets &
Liabilities
B Co. Stock
[NewCo.
stock
is converted into
shares of T Co.
stock — by operation
of law. B Co. thereby
holds 100% of T Co. stock.]
Old B Co.
Shareholders
100%
NewCo.
[B Co.
stock]
[NewCo. disappears —
extinguished by
operation of law]
• AFTER the Transaction •
Board of Directors
Old B Co. Shareholders plus
Old T Co. Shareholders
Bidder Co.
Old B Co.
Assets &
Liabilities
100%
Target Co.
Old T Co.
Assets &
Liabilities
Board of Directors
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824
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Diagrams
DIAGRAM 11
Reverse Triangular Merger
(Using Cash as Merger Consideration)
• BEFORE Transaction •
Board of Directors
Target Co.
Assets &
Liabilities
Board of Directors
T Co. Shareholders
Bidder Co.
Assets &
Liabilities
100%
NewCo.
(merger
consideration =
Cash)
Board of Directors
B Co. Shareholders
[Bidder Co.
incorporates
subsidiary (NewCo.)
& receives all of
NewCo.’s stock in
exchange for cash to
be used as merger
consideration]
• In the Transaction •
(NewCo. merges into Target Co.)
Target Co.
Assets &
Liabilities
Old T Co. Shareholders
(Old T Co. shares are
cancelled by operation
of law)
Bidder Co.
Assets &
Liabilities
Cash
Old B Co.
Shareholders
100%
[NewCo. stock
is converted into
shares of T Co. stock —
by operation of law.
B Co. thereby holds 100%
of T Co. stock]
NewCo.
[Cash]
[NewCo. disappears.
NewCo. stock is
converted into T Co.
shares — by operation
of law.]
• AFTER the Transaction •
Board of Directors
Old B Co. Shareholders
Bidder Co.
Old B Co.
Assets &
Liabilities
100%
Target Co.
Old T Co.
Assets &
Liabilities
[Old T Co. Shareholders
have been cashed out —
hold no stock]
Board of Directors
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A.
Diagrams
825
DIAGRAM 12
TWO STEP TRANSACTION:
Stock Purchase, Followed by Squeeze Out/Cash Out Merger
(Using Either a Reverse or a Forward Triangular Merger)
STEP ONE: Stock Purchase
• BEFORE Stock Purchase •
Board of Directors
Target Co.
Assets &
Liabilities
Board of Directors
T Co.
Shareholders
T Co. Stock
Bidder Co.
Assets &
Liabilities
B Co.
Shareholders
[Cash
tender offer
for (at least) 51%
of T Co. stock]
• AFTER Stock Purchase •
Board of Directors
Old B Co. Shareholders
Bidder Co.
Old B Co.
Assets &
Liabilities
Old T Co. Shareholders
51%
Target Co.
Old T Co.
Assets &
Liabilities
Board
Boardofof
Directors
Directors
49%
[The other 51% of the T Co.
shareholders have been cashed
out — hold no stock]
STEP TWO: Squeeze Out (Cash Out) Merger
(Using Reverse Triangular Merger)
• BEFORE Transaction •
Board of Directors
Old B Co. Shareholders
[B Co. votes its
T Co. stock to approve
transaction]
51%
Board of
Directors
Bidder Co.
Assets &
Liabilities
[B Co. incorporates subsidiary
(NewCo.) & receives all of
NewCo.’s stock in exchange
for cash to be used as merger
consideration]
100%
Target Co.
Assets &
Liabilities
NewCo.
New
Co.
(merger
consideration =
cash)
Cash)
49%
Board of
Directors
Old T Co. Shareholders
• In the Transaction •
Board of Directors
51%
[Target Co. is
surviving
corporation]
Target Co.
Assets &
Liabilities
Old B Co. Shareholders
Bidder Co.
Assets &
Liabilities
100%
NewCo. Assets & Liabilities
49%
[All of T Co.’s shares are
cancelled— by operation
of law]
Cash
NewCo.
[Cash]
[NewCo. disappears
& B Co.’s NewCo.
stock becomes 100%
of T Co. stock—
by operation of law]
Old T Co. Shareholders
(continued)
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826
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Diagrams
DIAGRAM 12
Continued
• AFTER the Squeeze Out Merger •
(Using Reverse Triangular Merger)
Old B Co. Shareholders
Board of Directors
BidderCo.
Assets &
Liabilities
100%
TargetCo.
Old T Co.
Assets &
Liabilities
[Old T Co. Shareholders have
been cashed out — hold no stock]
Board of Directors
ALTERNATIVE SECOND STEP: Squeeze Out (Cash Out) Merger
(Using Forward Triangular Merger)
• BEFORE the Transaction •
Board of Directors
Old B Co. Shareholders
Bidder Co.
Assets &
Liabilities
[B Co. votes its T Co.
stock to approve transaction]
51%
Board of
Directors
Target Co.
Assets &
Liabilities
B Co. incorporates subsidiary
(NewCo.) & receives all of NewCo.’s
stock in exchange for cash
to be used as merger consideration]
100%
NewCo.
(merger
consideration =
Cash)
49%
Board of
Directors
Old T Co. Shareholders
• In the Transaction •
Board of Directors
[Target shares
are cancelled
& Target Co.
disappears —
by operation
of law]
51%
Target Co.
Assets &
Liabilities
Old B Co. Shareholders
Bidder Co.
Assets &
Liabilities
100%
T Co. Assets & Liabilities
(by operation of law)
49%
Cash
NewCo.
[Cash]
[NewCo. is surviving
corporation — by
operation of law]
Old T Co. Shareholders
• AFTER the Squeeze Out Merger •
(Using Forward Triangular Merger)
Board of Directors
Old B Co. Shareholders
Bidder Co.
Old B Co.
Assets &
Liabilities
100%
NewCo.
Old T Co.
Assets &
Liabilities
Board of Directors
[Old T Co. Shareholders have been cashed out — hold no stock]
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