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The first step is the tender (or exchange) offer, where the buyer seeks to achieve a majority ownership, and the second step seeks to get ownership to 100%. In this step, the acquirer needs to reach a certain ownership threshold that legally empowers it to squeeze out minority shareholders (illustrated below).
A merger structure comprised of a newly created holding company with two subsidiaries, with one subsidiary merging into buyer as the survivor and the other subsidiary merging into target as the survivor. The goal of this structure is to keep the stock portion of the deal's consideration tax-free.
Transactions involving only a statutory merger often are referred to as ?one-step? transactions, while transactions involving a tender or exchange offer followed by a back-end merger often are referred to as ?two-step? transactions.
In the first step, the buyer initiates a tender offer to acquire at least a majority of the outstanding target company's stock. In the second step, the buyer completes a back-end merger to acquire the balance of the target company's stock.
Short-form merger The short form is a type of ?friendly? merger that can be used to combine two LLCs in Delaware. The state of Delaware also approved the consolidation of a Delaware non-corporate entity as the parent and a subsidiary in which the parent accounts for a minimum of 90% outstanding shares per stock class.
The two-step merger is quicker to execute since no proxy period or SEC approval is required, but the disadvantage is that the buyer needs a large percentage of the shares tendered. Regulation M-A requires that a summary term sheet be provided to investors as part of the disclosures made in a tender offer or merger.