Usually, Company combinations are undertaken as a way for one company to acquire another. There are different ways to accomplish this goal. The choice will depend not only on corporate law, but on business and tax considerations. This article will discuss some different ways in which separate business entities may be combined.

1. Merger and Consolidation
   
   A merger involves two existing corporations, with one combining into the other. For instance, X Corp. merges into Y Corp. X Corp. disappears and Y Corp. survives. A consolidation involves two existing corporations, both of which disappear to form a new entity: X Corp. and Y Corp. consolidate to form Z Corp. X Corp. and Y Corp. disappears and Z Corp. survives.
   
   A merger/consolidation is always a fundamental change for a corporation that will cease to exist. Thus, the transaction must be approved not only by that company's board of directors, but by its shareholder.  In some states, however, like Delaware, shareholders of a surviving corporation do not vote if the transaction will not amend that company’s articles and if the corporation will not issue an additional 20 percent of stock in consummating the deal.
   
   Mergers/consolidations feature “successor liability," which means that the surviving company will succeed to the rights and liabilities of the disappearing company. This doctrine protects creditors, if they had a claim against a company that disappeared in a merger successor liability assures that they now may assert that claim against the surviving company.
   
   
2. Triangular Mergers
   
   Suppose one “acquirer” company (or A Co.) wants to acquire another (called the “target" or T Co.). The two could set up a merger, with T Co. merging into A Co. Then, however, under the doctrine of successor liability, A Co. would assume the obligations of T Co.
   
   Instead, the parties might engineer a triangular merger. A Co. forms a wholly-owned subsidiary “Sub Co. ". A Co capitalizes Sub Co. with cash or with A Co. stock. A Co. owns all the stock of Sub Co. Then T Co. merges into Sub Co. Sub Co. receives all the stock of T Co. As a result,
   
   (1)  A Co. acquires all the stock of T Co. (because A Co's subsidiary now owns all that stock)
   
   (2)  The shareholders of T Co. get either stock in A Co. or cash (in which case they hold no stock in any of the companies), and (most importantly)
   
   (3)  A Co. does not assume responsibility for the liabilities of T Co. (Sub Co., as survivor of the merger, does that).
   
   In most of these deals, A Co. and T Co. are public corporations with widely-held stock, and the subsidiary is formed solely to facilitate the acquisition. Thus, the transaction may be substantially cheaper than a direct merger between A Co. and T Co., because the parties do not have to pay for a shareholder vote in a public corporation. More significantly, as noted, A Co. acquires T Co. without assuming direct liability for T Co.'s obligations.
   
   
3. Reverse Triangular Merger
   
   Another possibility is the reverse triangular merger. A Co. forms a wholly-owned subsidiary (Sub Co.), but Sub Co. then merges into T Co. In the merger between Sub Co. and T Co., shareholders of T Co. get the stock of Sub Co., which is exchanged for cash or perhaps for stock in A Co. As a result, T Co. ends up being a wholly-owned subsidiary of A Co.
   
   The critical point is that both triangular and reverse-triangular mergers involve three-way transactions by which T Co. becomes a wholly-owned subsidiary of A Co. without a transfer or assignment directly between the two. T Co.'s shareholders receive cash or shares of the A Co. even though the merger is with a subsidiary of that corporation.
   
   
4. Cash-out Merger
   
   A cash-out merger is exactly what it sounds like: shareholders of the target company give up their stock in the target in exchange for cash. Such transactions are also called freeze out or squeeze out mergers because they freeze or squeeze these shareholders out of their equity interest. Before the deal goes through, these persons are equity holders; afterward, they are not.
   
   In a typical cash-out merger, X Corp. is merged into Y Corp. The majority shareholders of X Corp receive stock in Y Corp and the minority shareholders of X Corp. receive cash or other property. This procedure can be used to force out unwanted minority shareholders, or to eliminate public ownership as part of a “going private” transaction (to cease being a publicly-traded company). There are legitimate reasons to cash out the minority shareholders, but such a transaction can also be oppressive.
   
   
5. Other Mergers
   
   Many mergers are between parent and subsidiary corporations. If the parent will be the surviving company, it is an upstream merger. If the subsidiary survives, it is a downstream merger. A downstream merger can be used to change the state of incorporation of a publicly-held corporation. The corporation creates a wholly-owned subsidiary in the new state and then merges itself into its subsidiary. The stock and financial interests of the parent are mirrored in the stock and financial structure of the subsidiary. When the merger occurs, each shareholder and creditor of the old publicly-held corporation incorporated in State A automatically becomes a shareholder and creditor of a corporation incorporated in State B.
   
   In many states, there is a special summary merger procedure, called a short-form merger, for upstream or downstream mergers in which the parent owns a large majority (usually 90 percent or more) of the stock of the subsidiary. The short-form merger allows a parent to merge its subsidiary into it (or vice versa) without a shareholder vote in either corporation. Moreover, the board of directors of the subsidiary is not required to approve the merger.
   
   
6. The Share Exchange
   
   Some states, following the lead of MBCA (2016), recognize the share exchange is a fundamental corporate change. It is a substitute for the reverse triangular merger, discussed in the preceding subpart. The name is misleading: it is not an exchange of shares, but a device that compels a sale of stock. It forces the shareholders of a target company (T Co.) to sell their stock to the acquiring company (A Co.). The result is that A Co. gets all the stock of T Co., and the T Co. shareholders end up with cash or other property.
   
   The share exchange is a fundamental change only for the target company. Accordingly, the transaction must be approved through the standard procedure. If it is, all shareholders must relinquish their stock under the terms of the exchange (even those who opposed the deal). A dissenting shareholder of the target company may assert appraisal rights. Because the share exchange is not a fundamental change for the acquiring company, its shareholders do not vote on the transaction and do not have a right of appraisal.
   
   
7. Fiduciary Issue in Mergers
   
   Mergers, like any fundamental change, might be abused to oppress minority shareholders.
   
   For example, X, Y, and Z are the shareholders of XYZ Corp. Each owns one-third of the stock. After a disagreement, X and Y cause XYZ Corp. to merge into XY Co., which they own. X, Y, and Z receive cash under the terms of the merger. X and Y run XY Corp., which now has acquired the former XYZ Co. But Z, out of luck, has some cash, no equity position.
   
   However, Z have statutory right of appraisal, by which Z can force the corporation to buy his/her stock for fair value, which may be a higher figure than the cash-out merger price Z was paid. In some other states, Z may be able to sue if the transaction was tinged with fraud or oppression.
   

See also：
Types of U.S. Company Mergers

Reference:
[1] Richard D. Freer. The law of corporations in a nutshell. West Pub. Co, 2020.