The major advantages of using a triangular structure are limitations of the voting rights of acquiring shareholders and that the acquirer gains control of the target through a subsidiary without being directly responsible for the target’s known and unknown liabilities.
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A transaction is usually taxable to the target firm's shareholders, if the acquirer's stock is used to purchase at least 30% of the target firm's stock or assets.
In a triangular cash merger, the target firm may either be merged into an acquirer's operating or shell acquisition subsidiary with the subsidiary surviving or the acquirer's subsidiary is merged into the target firm with the target surviving.
A transaction generally will be considered non-taxable to the seller or target firm's shareholder if it involves the purchase of the target’s stock or assets for substantially all cash, notes, or some other nonequity consideration.
The sale of stock, rather than assets, is generally preferable to the target firm shareholders to avoid double taxation, if the target firm is structured as a limited liability company.