Skip to content

CS Professional · Corporate Restructuring, Valuation and Insolvency · Planning and Strategy

Mehta Steels Ltd, an unlisted profitable company, plans to merge into its loss-making listed parent Rathi Industries Ltd, with Rathi continuing as the surviving entity and Mehta being absorbed. Which description fits best?

This is an upstream merger, because the subsidiary Mehta Steels merges into its holding company Rathi Industries, which survives. A reverse merger would require the parent to be absorbed into the subsidiary, so the profitability of the transferor does not change the classification.

  1. ADemerger of Mehta's undertaking
  2. BUpstream merger of a subsidiary into its parentCorrect
  3. CReverse merger, since the transferor is profitable
  4. DSlump exchange

Explanation

Where a subsidiary merges into its holding company, the holding company survives and it is an upstream merger. A reverse merger is where a parent or listed or loss-making company merges into a smaller or subsidiary company so that the latter survives. Here the parent survives, so it is not a reverse merger.

Did you get it right without looking?

One question tells you little. A timed set on Planning and Strategy shows your real accuracy, how long you take and where you lose marks.

Practise Planning and StrategyFree diagnostic mock

More Planning and Strategy questions