A merger in which the acquirer creates a wholly owned subsidiary into which the target company merges (the latter does not survive the merger). The subsidiary ends up holding all of the assets and liabilities of the target company. The shareholders of the target company receive stock in the parent company. Additionally, they may receive up to 50 percent or more of the total consideration in cash in exchange for their shares in the target company.

The parent company has nothing to do with any of the liabilities of the target company. Only the newly created subsidiary takes on the liabilities of the target company. The acquirer is not required to get permission from its shareholders. However, it is often required to obtain the approval of its lenders, owners, and other business partners/parties in order to assign or transfer the existing contracts to the new subsidiary company. Consequently, the subsidiary would need to apply for new licenses and permits in its own name from relevant authorities.