A reverse merger in which the public shell company forms a new shell subsidiary (wholly owned subsidiary), which is merged with and into the target or the private company seeking to merge (in a statutory merger). As a result, the private company becomes a wholly owned subsidiary of the public shell company, and must hold substantially all of the assets and liabilities of the target, including its own. This type of merger is typically used to bypass shareholder approval at the level of the shell company and to help the operating business maintain its corporate existence. The most important advantage of a reverse triangular merger is the possibility of the target retaining valuable contract rights such as nonassignable franchise, lease, etc. It also allow the target isolate its liabilities in a subsidiary of the acquirer, allowing the latter to avoid any possible acceleration of loans outstanding.

The reverse triangular merger is functionally similar to a type B reorganization.