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Legal Translation and Triangular Mergers in the International Context

We’ve blogged about professional language translation services in the context of international mergers and acquisitions. Typically, shareholders of a company that was the absorbed company in an M&A, they were issued with, as consideration for their loss of shares, shares in the surviving company. However, under the rules of Private International Law, money is now permitted as consideration and it is permissible to use shares of the surviving company – thus allowing for a triangular merger.

To illustrate, prior to the development of Private International Law, if foreign corporation X planned to convert company Y into a subsidiary, if a stock swap was not allowed in particular jurisdiction they would first have to form a corporation in the foreign jurisdiction and then take over Y in an absorption-type merger. Clearly this is more complex, especially considering the foreign language translations required to form a foreign corporation.

However, in jurisdictions where Private International Law has been adopted, this scenario has been simplified by allowing for a cash-out merger that takes the absorbed company’s shareholders out of the picture by simply paying cash instead of stock shares as consideration. With this method, the foreign shareholders have less concern about controlling jurisdiction, and the M&A can occur much more smoothly.

Up Next: Legal Translation and the Blurring Jurisdictional Boundary