Statutory merger

A statutory merger is a combination, authorized by state corporate-law statute (in the U.S., a state's general corporation law such as Delaware's DGCL §251), in which two corporations combine and one survives while the other ceases to exist. By operation of law, the surviving entity automatically succeeds to all of the disappearing company's assets, rights, contracts, liabilities and obligations — no asset-by-asset transfer or assignment is required.

How it differs from an asset or stock purchase

• Unlike an asset purchase, nothing is transferred item by item — the combination happens automatically at the entity level, so contract-assignment friction largely disappears.
• Unlike a simple stock purchase negotiated share-by-share, a merger can force out non-consenting minority shareholders: once the required vote is obtained, dissenters receive the merger consideration (or pursue statutory appraisal rights) rather than being able to block the deal.

The "direct" two-party merger and why it is rare

In a direct statutory merger ("Target merges into Acquirer," or A+B→A), the two operating companies combine directly. This is conceptually the simplest merger but is uncommon for acquisitions because the surviving acquirer inherits the target's liabilities directly onto its own balance sheet and exposes itself to the target's shareholders voting on the deal. To isolate these risks, buyers almost always use a triangular structure instead, interposing a subsidiary.

Triangular variants

Modern acquisitions overwhelmingly use one of two triangular forms, in which the buyer forms a transitory merger subsidiary ("merger sub") that merges with the target:

• Forward triangular merger — the target merges into the merger sub; the sub survives. Treated like an asset acquisition for some purposes; the target's separate existence ends.
• Reverse triangular merger — the merger sub merges into the target; the target survives as a wholly owned subsidiary of the buyer. This preserves the target's contracts and licenses and is the most common public-company acquisition structure.

Both isolate the target's liabilities in a subsidiary and require approval only from the target's shareholders (the buyer votes its own merger sub).

Approval and process

A statutory merger requires board approval of both constituents and, typically, a shareholder vote of the target (and sometimes the acquirer, if it is issuing significant stock). For public companies the vote is solicited via a proxy/registration statement, usually supported by a fairness opinion. Dissenting shareholders generally have appraisal rights to seek judicial determination of fair value. The whole arc is documented in the merger agreement (a form of definitive agreement) and completed by filing articles of merger with the state.

Tax dimension

A statutory merger can qualify as a tax-free reorganization (a "Type A" reorganization under IRC §368(a)(1)(A), including its triangular variants) if the continuity and consideration requirements are met — a key reason stock-for-stock mergers are structured this way. See reorganization types.