Also known as a parent-subsidiary merger, a short-form merger is a merger (www.practicallaw.com/3-382-3625) between a parent company (www.practicallaw.com/3-382-3668) and its substantially (but not necessarily wholly) owned subsidiary (www.practicallaw.com/5-383-2228), with either the parent company or the subsidiary surviving the merger. 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.
If a buyer acquires less than 100% (but generally at least 90%) of a target company's outstanding stock, it may be able to use a short-form merger to acquire the remaining minority interests. The merger allows the buyer to acquire those interests without a stockholder vote, thereby purchasing all of the target company's stock. This merger process occurs after the stock sale closes, and is not a negotiated transaction.
For more information on the use of short-form mergers, see: