
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Author: Dan Brecher
Date: May 22, 2025
Counsel
212-286-0747 dbrecher@sh-law.comMerging two companies is a complex legal and business transaction. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process that involves important corporate governance considerations. A short form merger, in which an acquiring company merges with a subsidiary corporation, offers a more streamlined process. However, like all M&A transactions, it is important to understand the legal nuances and proper due diligence mergers and acquisitions.
A short form merger, often referred to as a parent-subsidiary merger, is a merger transaction involving a parent company and its substantially owned subsidiary, with the parent company typically surviving the merger. Provided that statutory requirements are met, a short-form merger does not require approval of the stockholders of the subsidiary.
The requirements of a short form merger are dictated by state statute. For instance, under Section 253 of the Delaware General Corporation Law (DGCL), a parent corporation can merge with a subsidiary corporation provided the parent corporation owns “at least 90% of the outstanding shares of each class of the stock” of the subsidiary corporation. New York and New Jersey similarly require that the parent company own at least 90% of the subsidiary’s outstanding shares of each class to complete a merger without authorization of the shareholders.
Once the merger is completed, only the acquiring company survives. Most short form mergers are “upstream,” meaning the parent company acquires its subsidiary. The goal is often to acquire the remaining minority interests in the subsidiary that the parent doesn’t already own. However, “downstream” mergers, where a parent company is merged into a subsidiary, are also possible. In such cases, approval by the parent’s shareholders is generally required.
As compared with other types of mergers, a short form merger is a more streamlined transaction. The need to obtain minimal shareholder approval saves valuable time and money during the merger process. It also lessens the burdens as compared with other types of mergers. For example, the required due diligence in mergers and acquisitions involving a parent and subsidiary is much less arduous.
The requirements of a short form merger are established by state law and, therefore, can vary based on where the companies operate. Typically, in a short-form merger, the first step is for the parent company’s board of directors to adopt a plan of merger. The contents of the plan generally include (at minimum):
The subsidiary’s board does not have to approve the merger plan. In most cases, neither the parent’s shareholders nor the subsidiary’s shareholders must approve of the merger. Obtaining sign off from the subsidiary’s shareholders is considered superfluous because the parent owns enough shares to guarantee approval. Meanwhile, approval of the parent’s shareholders isn’t needed because the transaction will not materially alter their interests.
Other corporate formalities vary from state to state. For example, Delaware law requires the board of directors of the parent corporation to (1) adopt a resolution approving a certificate of merger, and (2) furnish the minority shareholders a notice advising that the merger has occurred and that they are entitled to seek appraisal. The merger does not require a vote from the minority shareholders, absent contractual obligations to the contrary.
While every M&A transaction is unique, a short form merger typically involves the following steps:
Scarinci Hollenbeck, LLC offers comprehensive guidance to clients engaging in various M&A transactions, including short form mergers. The attorneys at Scarinci Hollenbeck, LLC Mergers & Acquisitions Practice assist with due diligence in mergers and acquisitions, negotiating merger plans, securing financing, managing intellectual property assets, handling employment matters, and facilitating post-deal integration.
If your organization is interested in learning more about short form mergers or needs assistance with due diligence mergers and acquisitions, contact Scarinci Hollenbeck, LLC today.
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