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Mergers

Mergers are the most common form of restructuring undertaken by successful startups. A merger is by nature a statutory process, and hence its structure is prescribed by the corporate laws of the merging companies' state of incorporation.

Classic Mergers

In the classic merger, the target is incorporated into the acquirer, which is also deemed as a merging company, in a transaction which takes place at the corporate level. The consent of both companies' shareholders is usually required. The main disadvantages of classic mergers are the need for the acquirer's shareholders' approval for the transaction (which is troublesome when a large company is taking in a small company) and the legal risk involved in the acquirer's assuming all of the target's liabilities with all of the uncertainties that this entails. See Figure 15-1.


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