To describe:-The advantage and disadvantage of taxable merger as opposed to tax-free merger, to describe the basic determinant of tax status in mergers and whether an LBO is taxable or nontaxable.
Merger:
Merger is the combination of two entities into one in which the shareholders of both companies merge their resources into a new company.
Taxable Merger:
Taxable merger is the merger in which one or both companies have to pay the taxes on the
Tax-Free Merger:
Tax-free merger is the merger in which none of the companies has to pay the taxes on the capital gains which arise due to the merger.
Leverage Buyout (LBO):
Leverage buyout is the process of acquiring a firm in which the target firm pays off partially by the equity and partially by the debt instruments.
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