Merger
What does "Merger" mean in law?
A merger is a fundamental corporate transaction in which two or more corporations combine, with one entity (the surviving corporation) absorbing the other (which ceases to exist as a separate legal entity). Mergers typically require approval by the board of directors of each constituent corporation and a vote of the shareholders, usually by a majority or supermajority of outstanding shares. Under the de facto merger doctrine, courts may treat an asset acquisition structured to avoid statutory merger requirements as a merger if the transaction has the economic substance of one, thereby triggering shareholder voting and appraisal rights. In change-of-control mergers, directors face heightened fiduciary duties under frameworks such as Revlon duties and the Unocal test.
Definition
A merger is a fundamental corporate transaction in which two or more corporations combine, with one entity (the surviving corporation) absorbing the other (which ceases to exist as a separate legal entity). Mergers typically require approval by the board of directors of each constituent corporation and a vote of the shareholders, usually by a majority or supermajority of outstanding shares. Under the de facto merger doctrine, courts may treat an asset acquisition structured to avoid statutory merger requirements as a merger if the transaction has the economic substance of one, thereby triggering shareholder voting and appraisal rights. In change-of-control mergers, directors face heightened fiduciary duties under frameworks such as Revlon duties and the Unocal test.
Example
When Corporation A merged with Corporation B, Corporation B ceased to exist and its shareholders received shares of Corporation A as consideration, with dissenting shareholders entitled to exercise their appraisal rights to receive the fair value of their shares.