Forwardly Inc (FORW)

[NOBO]

Summary on mergers
MERGERS
Although a merger involves a combination of two or more entities, they are rarely equal participants. Sometimes a merger is really an acquisition financed by common stock. Mergers are typically more expensive than acquisitions, with the parties incurring higher legal costs, Hamilton says.

There are several ways to structure a merger. In a forward merger, the target merges into the acquirer’s company, and the selling shareholders receive the acquirer’s stock. In a reverse merger, the acquirer merges into the target company and gets the target company’s stock. (In some cases a private company uses a reverse merger with a public one as a way to go public at a lesser cost and with less stock dilution than through an initial public offering.) In a subsidiary merger, an acquirer incorporates an acquisition subsidiary and merges it with the target company. In a triangular merger, the target company’s assets are conveyed to the acquirer’s company in exchange for the acquirer’s stock. Each of these types of mergers can have different tax and legal consequences, and the acquirer and the seller must seek proper tax and legal advice from experts.

There are many reasons for parties to decide to merge rather than treat the combination as an acquisition. Some of the more frequently encountered reasons are

A merger does not require cash.

A merger may be accomplished tax-free for both parties.

A merger lets the target (in effect, the seller) realize the appreciation potential of the merged entity, instead of being limited to sales proceeds.

A merger allows the shareholders of smaller entities to own a smaller piece of a larger pie, increasing their overall net worth.

A merger of a privately held company into a publicly held company allows the target company shareholders to receive a public company’s stock, despite the liquidity restrictions of SEC Rule 144a.

A merger allows the acquirer to avoid many of the costly and time-consuming aspects of asset purchases, such as the assignment of leases and bulk-sales notifications.

Of considerable importance when there are minority stockholders is the fact that upon obtaining the required number of votes in support of the merger, the transaction becomes effective and dissenting shareholders are obliged to go along.