Editing Mergers and acquisitions (section)

==Legal structures==
{{Competition law}}
A corporate acquisition can be structured legally as either an "asset purchase" in which the seller sells business assets and liabilities to the buyer, an "equity purchase" in which the buyer purchases equity interests in a target company from one or more selling shareholders or a "merger" in which one legal entity is combined into another entity by operation of the corporate law statute(s) of the jurisdiction of the merging entities.<ref name="WachtellLiptonRosenKatz2020">{{Cite book |last1=Wachtell |last2=Lipton |last3=Rosen |last4=Katz |url=https://www.wlrk.com/webdocs/wlrknew/ClientMemos/WLRK/WLRK.27094.20.pdf |title=Takeover Law and Practice |year=2020 |pages=77}}</ref> In a transaction structured as a merger or an equity purchase, the buyer acquires all of the assets and liabilities of the acquired entity. In a transaction structured as an asset purchase, the buyer and seller agree on which assets and liabilities the buyer will acquire from the seller.

Asset purchases are common in technology transactions in which the buyer is most interested in particular [[intellectual property]] but does not want to acquire liabilities or other contractual relationships.<ref>{{cite web|last=Moore|first=Jim|title=Get acquired! An idiot's guide to technology M&A|url=https://venturebeat.com/2012/12/26/mergers-acquisitions/|access-date=19 August 2013|date=2012-12-26}}</ref> An asset purchase structure may also be used when the buyer wishes to buy a particular division or unit of a company that is not a separate legal entity. Divestitures present a variety of unique challenges, such as identifying the assets and liabilities that pertain solely to the unit being sold, determining whether the unit relies on services from other parts of the seller's organization, transferring employees, moving permits and licenses, and safeguarding against potential competition from the seller in the same business sector after the transaction is completed.<ref name="mckenna" />

=== Types of mergers ===

From an economic point of view, business combinations can also be classified as horizontal, vertical and conglomerate mergers (or acquisitions). A '''horizontal merger''' is between two competitors in the same industry. A
'''vertical merger''' occurs when two firms combine across the value chain, such as when a firm buys a former supplier (backward integration) or a former customer (forward integration). When there is no strategic relatedness between an acquiring firm and its target, this is called a '''conglomerate merger''' (Douma & Schreuder, 2013).<ref name="academia.edu">{{cite web | url=https://www.academia.edu/93596473 | title=Economic approaches to mergers and acquisitions | date=January 2013 | last1=Schreuder | first1=Hein }}</ref>

The form of merger most often employed is a triangular merger, where the target company merges with a [[shell company]] wholly owned by the buyer, thus becoming a subsidiary of the buyer.  In a '''"forward triangular merger'''", the target company merges into the subsidiary, with the subsidiary as the surviving company of the merger; a '''"reverse triangular merger"''' is similar except that the subsidiary merges into the target company, with the target company surviving the merger.<ref name="WachtellLiptonRosenKatz2020" />

Mergers, asset purchases and equity purchases are each taxed differently, and the most beneficial structure for tax purposes is highly situation-dependent. Under the U.S. [[Internal Revenue Code]], a forward triangular merger is taxed as if the target company sold its assets to the shell company and then liquidated, them whereas a reverse triangular merger is taxed as if the target company's shareholders sold their stock in the target company to the buyer.<ref>{{cite web|last=Griffin|first=William F.|title=Tax Aspects of Corporate Mergers and Acquisitions|url=http://www.davismalm.com/UploadedDocuments/Articles/GriffinLevTaxAspectsMergersAcquisitionsUpdated.pdf|publisher=Davis Malm & D'Agostine, P.C.|access-date=19 August 2013|url-status=dead|archive-url=https://web.archive.org/web/20130511135943/http://www.davismalm.com/UploadedDocuments/Articles/GriffinLevTaxAspectsMergersAcquisitionsUpdated.pdf|archive-date=11 May 2013}}</ref>