BTL 751 - Triangular Merger

 

The Banking Tutor’s Lessons

BTL 751                                                                          06-02-2025

Triangular Merger

 

A triangular merger is a corporate strategy where a company acquires a target company through a subsidiary. The target company is absorbed into the subsidiary, which becomes the sole owner of the target company.

 

Types of triangular mergers

 

Forward triangular merger: The target company is merged into the buyer's subsidiary. This is also known as an indirect merger.

 

Reverse triangular merger: The subsidiary is merged into the target company.

 

Benefits of triangular mergers

 

Can be useful for strategic, financial, and tax reasons

 

Can be a way to reduce the effort needed to get shareholder approval for an acquisition

 

Can be useful when some shareholders are opposing a merger

 

Considerations

 

Triangular mergers can be complex and involve various regulatory, tax, and legal considerations

Companies considering a triangular merger often work closely with legal and financial advisors.

 

Example

 

A prominent example of a triangular merger in India is when Bharti Infratel merged with Indus Towers in a forward triangular merger, creating one of the largest telecom tower companies in the country; this allowed Bharti Infratel to effectively acquire Indus Towers without directly absorbing its shares, utilizing a subsidiary company as a vehicle for the merger.

 

Structure:

 

Bharti Infratel created a subsidiary company which then acquired Indus Towers, effectively making Indus Towers a part of the Bharti Infratel group.

 

Benefit

 

This structure allowed for a cleaner integration and streamlined ownership while maintaining operational continuity within Indus Towers.

 

 

Sekhar Pariti

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