Short Form Mergers Specifics

When we talk about the process of mergers and acquisitions we mean the merger of two companies into one, which in theory sounds very simple. But in reality, it is a long and time-consuming process that has many steps and small nuances that also need to be solved immediately. Success depends on many factors, and the types of mergers themselves are very different. For example, there are triangular mergers, vertical, horizontal, and short mergers. In this article, we will talk about the last type in more detail.

What is a short merger?

A short merger is a type of merger were a parent and a subsidiary are going to merge into one, but the subsidiary doesn’t have to be wholly owned by the acquiring company. This merger is also divided into two types:

  • The most common one is when the acquired company is deemed to be the spoilsport
  • On very rare occasions, the cord of the acquiring company is merged with the subsidiary on an equal footing, which is called “recycling.”

During a brief merger, regulations require the parent company to have at least 90% of the issued stock of the selling company. But this does not apply to all states, some, like Florida, have a 10% lower percentage of such shares in the parent companies and thus must have a minimum of 80% of the issued shares. The same, every state has different rules which companies have to comply with during short mergers, and in some states, the requirements will be stricter, in some weaker.

A short merger could easily be compared to a tender offer. After all, in it, in the same way, the buyer company puts forward an offer to the seller company to own almost all of its shares.

Two-step mergers

Brief mergers are not an exception among financial transactions, that’s why they also have several varieties, and the two-step merger is one of them. Its designation is rather simple – it’s the same brief merger but which is divided into two stages.

The first stage is a tender offer which offers to buy all the shares up to the black company, the second stage is when the buyer company buys absolutely any shares of the seller’s company that are in circulation.

Advantages of Brief Mergers

Companies conduct brief mergers when they don’t want to bind with shareholders and wait for their approval. It is one of the rare cases where a transaction can go through without shareholder involvement because shareholder approval is generally required for any major corporate transaction. The whole process of a short merger is much faster and more efficient than other M&A transactions, which saves you time and costs and also avoids the additional problems that often arise with other types of mergers.  So, the conclusion is that short-form mergers are much more practical, cheaper, and faster than all other similar transactions.

What can help you during an M&A transaction?

So, during an M&A transaction, there is a circulation of various documents which are confidential but are necessary for the companies to soberly assess each other and make sure that they are transparent.

It used to take too much time to analyze the data, but now with programs such as virtual data rooms, you can check all the necessary documents even while sitting at home.

These spaces provide you with the best level of security as well as the convenience and flexibility to resolve all important issues remotely. They support any type of device and OS, save you time in face-to-face meetings, and search for the documents you need with quick search features.