Cayman SPV Structuring for Cross-Border M&A: When and Why the Cayman Acquisition Vehicle Still Makes Sense

A canonical leveraged acquisition structure employs a layered Cayman vehicle architecture. At the apex sits a TopCo—a Cayman exempted company incorporated for the sole purpose of serving as the acquisition vehicle and, post-acquisition, as the holding company for the target. The TopCo is typically 100% owned by a fund or by a consortium of financial sponsors. Below the TopCo sits a BidCo (or multiple intermediate holding companies), which serves as the direct bidder for the target company and the immediate parent of the merged or acquired target. In the simplest structure, the TopCo directly owns the BidCo; in more complex structures, there may be intermediate holdcos for financing purposes or to facilitate preferred dividend streams to different classes of investors.

The acquisition itself is effected through a Cayman statutory merger under Part XVI of the Companies Act (2023 Revision). The BidCo, as the surviving company, merges with and into the target company (or vice versa, depending on whether a forward or reverse merger is preferred), resulting in a single legal entity that assumes all of the target's assets, liabilities, contracts, and regulatory approvals through automatic operation of law. The merger is effectuated by filing a merger application with the Cayman Islands Registrar of Companies, supported by board resolutions of both the BidCo and the target company authorising the merger and approving the merger terms. Assuming standard procedural requirements are met—notice to shareholders, shareholder approval by the requisite majority (typically simple majority unless the articles provide otherwise), and filing of the merger application—the merger becomes effective on registration.

The statutory merger mechanism is invaluable in acquisition practice because it avoids the need for an asset-by-asset transfer of target contracts and regulatory approvals. Many material contracts (particularly in regulated industries such as financial services, telecommunications, or energy) contain change-of-control restrictions that would trigger cancellation or consent requirements if the target were sold asset-by-asset or if control changed through a share sale. A statutory merger, by contrast, preserves the continuity of the legal entity, and most change-of-control provisions in such contracts are triggered only by a share sale, not by a merger where the merged entity retains the target's corporate identity (even if ultimately owned by the BidCo). This continuity is a material advantage over jurisdictions with weaker merger statutes or no statutory merger mechanism at all.

The transaction is financed through a combination of equity (provided by the sponsor and other investors) and debt. The debt is typically arranged by a syndicate of financial institutions and is often secured on a portfolio basis by the assets of the TopCo, BidCo, and (in some structures) the target company itself. Cayman law permits the granting of security interests over company assets and permits the creation of intercreditor arrangements between senior and subordinated lenders without the friction that regulatory or statutory frameworks in other jurisdictions might impose. The articles of the BidCo and TopCo are drafted to permit the granting of security, to allow for the distribution of cash to sponsors subject to leverage maintenance covenants, and to create preferential dividend streams for different investor classes. These constitutional arrangements, which would be extraordinarily difficult to implement in a UK or US public company, are routine in Cayman exempted companies and are enforced by Cayman courts without reference to regulatory policy considerations about capital adequacy or shareholder protection.

The Advantages of Cayman Incorporation for Acquisition Vehicles

Why Cayman, rather than the BVI, Singapore, or Ireland? The answer lies in a combination of factors.

First, Cayman's statutory merger framework is comprehensive and mature. Part XVI of the Companies Act (2023 Revision) sets out the mechanics of mergers and consolidations with surgical precision. A transaction team can draft merger documentation with confidence that the statutory framework will work as intended and that courts will enforce the mechanism predictably. The Privy Council has clarified the scope and application of Part XVI in cases decided over the past two decades, removing many technical ambiguities. By contrast, the BVI's merger statute, although similar in substance, has been revised multiple times and is subject to greater uncertainty about the treatment of certain technical issues (such as the treatment of dissenting shareholder rights or the mechanics of mergers involving non-resident targets). Singapore's merger framework is statutory but less commonly used in the context of cross-border M&A and has less developed case law.

Second, Cayman offers tax neutrality without the compliance burdens that Irish incorporation might impose. While Ireland is an excellent choice for operating companies benefiting from Ireland's extensive tax treaty network and corporate tax rate, an Irish incorporation is subject to annual compliance requirements, Irish business registration, and the risk that the Irish tax authorities will characterise the Irish company as having a business presence or permanent establishment in Ireland, triggering a corporate tax liability. A Cayman exempted company, by contrast, is subject to no Cayman corporate income tax, no requirement to maintain operational presence in Cayman, and minimal ongoing compliance. The sponsor can rely on a service provider in Cayman to handle statutory filings and compliance, and the company can operate from the sponsor's London or US office with no tax or regulatory consequence.

Third, Cayman permits constitutional flexibility that is simply unavailable in other jurisdictions. UK and US company law is predicated on a bedrock principle of shareholder equality: absent explicit differentiation in the articles or constitution, all shareholders are treated identically. Cayman law, by contrast, permits the articles of association to create bespoke share classes with entirely different economic and governance rights. A sponsor's preferred shares might carry a fixed dividend preference, a liquidation preference, anti-dilution rights, board representation rights, and protective provisions (such as a requirement for investor approval of related-party transactions, the incurrence of debt above a certain threshold, or the sale of substantially all assets). Common equity holders—whether management or co-investors—might hold shares with no preferential rights but with potential carry participation if financial returns exceed specified thresholds. Such intricate tiering of rights is routine in Cayman structures and is enforced by Cayman courts as part of the company's constitutional bargain.

Fourth, Cayman's regulatory regime for exempted companies is light-touch. An exempted company (which includes most acquisition vehicles and fund structures) is not required to disclose directors' interests, executive compensation, or related-party transactions to regulators. Annual compliance filings are minimal. By contrast, a UK company must file annual returns disclosing directors and shareholders, must file audited financial statements (unless it qualifies for small company exemption), must navigate the UK's corporate governance code, and may be subject to takeover regulations, financial reporting standards, and shareholder disclosure rules depending on its status and shareholder base. For an acquisition vehicle—which is typically a holding company with no operational business and no public shareholders—the UK compliance burden is disproportionate.

Fifth, Cayman courts have developed a sophisticated and predictable jurisprudence on the interpretation of acquisition documents, the enforcement of intercreditor agreements, and the resolution of disputes arising in leveraged finance and acquisition contexts. Many of the court's decisions have been made by judges experienced in commercial law and finance, and the court has been willing to enforce complex and commercially negotiated arrangements without imposing paternalistic restrictions. If a financing agreement contains an assignment of rights, a subordination clause, or a waiver of defences that sophisticated parties have negotiated, the court will enforce it. This predictability is invaluable in acquisition structures where tens or hundreds of millions of pounds are at stake and all parties expect that documented agreements will be enforced.

Statutory Mergers and Schemes of Arrangement: Choice of Mechanism

Part XVI of the Companies Act (2023 Revision) provides for two primary mechanisms of corporate combination: statutory mergers (Sections 203-220) and statutory consolidations (Sections 221-228). A statutory merger involves the merger of two companies, with one surviving and the other dissolving. A statutory consolidation involves the consolidation of two or more companies into a new company, with all merging companies dissolving. In acquisition practice, statutory mergers are far more common.

The BidCo, as the acquiring company, merges with and into the target, or vice versa. The statutory merger mechanism operates by operation of law: upon filing of the merger application and registration by the Registrar, the surviving company automatically acquires all assets, liabilities, and rights of the merging company. No asset transfer, no contract assignment, and no novation is required. The statutory framework sets out the procedural requirements:

• each company must adopt a merger agreement, approved by its board;
• shareholders of each company must approve the merger (typically by majority vote, although dissenting shareholders have appraisal rights); and
• the merger application, together with supporting documentation (including the merger agreement and evidence of shareholder approval), must be filed with the Registrar.

Once registered, the merger is effective, and the merging company ceases to exist.

The statutory merger mechanism is so powerful in the acquisition context that it has become the standard operating procedure for Cayman-based acquisitions. However, Part XVI also permits a variant: the short-form merger, available when one company owns 90% or more of another company and there are no dissenters. The short-form merger requires only board approval; no shareholder vote is required. This provision is useful in post-acquisition restructurings, where a newly-acquired subsidiary may be merged into its parent without shareholder ceremony.

Cayman law also provides for schemes of arrangement under Section 86 of the Companies Act. A scheme of arrangement is a court-approved reorganisation mechanism available when a court is satisfied that a compromise or arrangement proposed between a company and any class of its members or creditors is fair and should be sanctioned. Schemes of arrangement are less commonly used in acquisition contexts (they are more typical in insolvency or in situations where a company is recapitalising its debt or equity), but they can be valuable in contested takeover situations or where the transaction structure requires high court approval for some reason. The advantage of a scheme of arrangement over a statutory merger is that the scheme can be tailored to accommodate non-standard economic structures or mixed consideration structures (cash, shares, or earn-out rights) more flexibly than the standard statutory merger mechanism. However, the scheme also requires court approval, which adds time and cost, making it a tool of last resort rather than a preferred mechanism in routine acquisitions.

Compulsory Acquisition and Squeeze-Out Mechanics

Sections 88 to 90 of the Companies Act (2023 Revision) provide for compulsory acquisition (squeeze-out) of dissenting shareholders. If a bidder has acquired 90% or more of the shares of a target company within four months of a public offer to acquire shares, the bidder can, by written notice to the remaining shareholders, require them to transfer their shares to the bidder on the same terms as the original offer. The squeeze-out is effected by operation of law: if the remaining shareholders do not object within a specified period (typically 20 working days), the shares are automatically transferred. The statutory framework thus avoids the need for dissenting shareholders to bring objections and permits the bidder to achieve 100% ownership without protracted litigation or holdout negotiations.

The compulsory acquisition mechanism in Cayman is less frequently invoked in acquisition practice than the statutory merger mechanism—because the statutory merger achieves 100% acquisition automatically, without the need for a post-acquisition squeeze-out step—but it remains available as a fallback if, for some reason, the merger step cannot be completed. The statutory framework for squeeze-out is also less cumbersome than the equivalent mechanism in the UK (found in Sections 974-991 of the Companies Act 2006), which requires the bidder to notify the company, which then notifies shareholders, creating multiple notification steps and procedural requirements. The Cayman mechanism is more streamlined and creates less scope for procedural objections. This efficiency is valuable in situations where a bidder has acquired a substantial majority stake and wishes to move rapidly to 100% ownership without litigation risk.

Share Class Architecture and Bespoke Governance Rights

One of the most powerful features of Cayman corporate law, as applied to acquisition structures, is the ability to create unlimited classes of shares with bespoke economic and governance rights. A typical acquisition structure might employ four or five share classes, each with different characteristics:

• Class A shares might be held by the sponsoring PE fund and carry preferential dividend rights, mandatory redemption rights on exit, and protective provisions (such as a requirement for investor consent to debt above certain levels).
• Class B shares might be held by co-investors and carry no preferential dividend but participate in carry distributions above specified return thresholds.
• Class C shares might be held by management and carry no preferential dividend but participate fully in carry, with provisions for vesting contingent on employment continuity or performance metrics.
• Class D shares might be held by quasi-equity providers (such as mezzanine lenders) and carry a specified cash return and a participation right in upside.
• Class E shares might be held by the founders of the target and carry tag-along and anti-dilution rights.

Each class is defined in the articles of association, and the rights of each class—dividend preferences, liquidation preferences, conversion rights, protective provisions, and governance rights—are spelled out in granular detail. This architecture is enforceable in Cayman without friction, and the court will respect the bargain made between the different investor classes. By contrast, creating such complex share class structures in a UK or US company would attract regulatory scrutiny and might trigger securities laws or corporate governance concerns.

The flexibility of Cayman share architecture is invaluable in acquisition financing, particularly in leveraged structures where multiple investor classes (sponsors, co-investors, management, lenders, and quasi-equity providers) must be accommodated within a single capitalization structure. Furthermore, Cayman law permits the articles to include detailed governance provisions: restrictions on the transfer of shares, call and put rights (permitting the company or certain shareholders to force a sale of shares on specified trigger events), drag-along rights (permitting a majority to force minority shareholders to join a sale), tag-along rights (permitting minority shareholders to participate in a sale), and preferential purchase rights. These provisions create a complete contractual governance framework, reducing the need for side agreements and creating clarity about how the transaction will be managed. Moreover, the articles can provide for management incentives (such as carry pools, with provision for vesting over time or contingent on performance), for sponsor priority in cash returns, and for detailed exit procedures (triggering when certain financial returns are achieved, or when a specified time period has elapsed). A sophisticated Cayman acquisition structure is thus a self-contained governance contract, embedded in the articles, which all shareholders have signed (or are deemed to have agreed to by acquiring their shares).

The Interaction Between Cayman Corporate Law and Target-Jurisdiction Takeover Regulations

Although the acquisition vehicle is incorporated in Cayman, the target company is often incorporated in a different jurisdiction (the UK, the US, Germany, France, or another country), and the acquisition itself is subject to takeover regulations in the target's home jurisdiction. In the UK, for example, an acquisition of a public company or a company whose shares are traded on a regulated market is subject to the Takeover Code, administered by the Takeover Panel. The Takeover Code imposes mandatory bid rules, disclosure requirements, and conduct of business rules that apply regardless of where the bidder is incorporated. Similarly, in the US, acquisitions of public companies are subject to federal securities laws (including the Williams Act and SEC rules on tender offers), state corporation law (which may impose appraisal rights, fiduciary duty litigation, or anti-takeover defences), and industry-specific regulations.

The answer is that Cayman corporate law does not directly govern the conduct of the acquisition. The BidCo, though incorporated in Cayman, must comply with the takeover regulations applicable to the target. If the target is a UK public company, the BidCo must comply with the Takeover Code. If the target is a US public company, the BidCo must comply with US federal securities laws and state corporation law. The Cayman incorporation of the BidCo is irrelevant to the substantive conduct of the acquisition—it is merely the legal vehicle through which the acquisition is effected.

However, once the acquisition is completed and the target is merged into the BidCo (or the BidCo is merged into the target), the combined entity's jurisdiction of incorporation becomes relevant. If the target is a UK company and is merged with a Cayman BidCo (with the Cayman BidCo surviving), the combined entity becomes a Cayman company, subject to Cayman corporate law and exempt from ongoing UK securities regulation (assuming the company is no longer a public company and does not maintain a listing on a UK exchange). This change of jurisdiction can be material: the combined entity is no longer subject to UK takeover regulations, the UK Corporate Governance Code, or the UK Financial Conduct Authority's listing rules. It is subject instead to Cayman exempted company regulation, which is minimal. This migration of the company's jurisdiction of incorporation from a highly-regulated jurisdiction (like the UK or US) to a light-touch jurisdiction (like Cayman) is often a motivating factor for sponsors in choosing Cayman incorporation for the acquisition vehicle.

Forward vs. Reverse Merger: A Structural Choice

Post-acquisition, the company is no longer subject to public company disclosure regimes, is not required to maintain a public float, and can be restructured, recapitalised, and operated according to the sponsor's priorities without the friction of public company regulation. However, sponsors must be alert to the legal status of the merged entity in the target jurisdiction. If the target company is merged into the Cayman BidCo (so the BidCo survives), the combined entity becomes a foreign company (a non-UK company, a non-US company, as the case may be) incorporated in Cayman. Such a company may be required to register as a foreign company in the target jurisdiction if it carries on business there, may be subject to local corporate law for certain purposes (such as employment law, competition law, or tax law), and may face unexpected regulatory friction.

Many sponsors, anticipating this issue, structure the acquisition so that the BidCo is merged into the target (so the target survives), rather than the reverse. This results in the target remaining a UK company (or US company, as the case may be), subject to local corporate law and regulation, but owned by the Cayman TopCo and BidCo. This approach avoids the registration issues associated with foreign company status, but it means the target company itself remains subject to its home-jurisdiction corporate law. The choice between forward and reverse merger is a material structural decision and should be made in consultation with legal advisers in the target jurisdiction and in Cayman.

Leveraged Finance Structures and Intercreditor Arrangements

The acquisition of a meaningful commercial business typically requires leveraged financing. The TopCo or BidCo borrows money from senior lenders (such as banks), mezzanine lenders (such as alternative asset managers), and potentially subordinated lenders or quasi-equity providers. These loans are typically secured by the assets of the TopCo, BidCo, and target company on a portfolio basis. The loans are structured through a credit agreement, which sets out the terms of the facilities, covenants, conditions precedent, and events of default.

Cayman law permits the creation of security interests over company assets and permits the creation of complex intercreditor arrangements between senior and subordinated lenders. An intercreditor agreement is a contract between the senior lender and subordinated lenders that specifies the priorities in payment, enforcement procedures, and the subordinated lender's rights if the company enters bankruptcy or is in default. The intercreditor agreement permits the senior lender to exercise forbearance without the subordinated lender being able to force the company into formal insolvency, and permits the senior lender to work with the borrower to restructure the debt or to sell the company to a third party, even if such actions would ordinarily trigger cross-defaults in the subordinated facilities.

These arrangements are highly sophisticated and turn on detailed drafting. Cayman courts have demonstrated a willingness to enforce intercreditor arrangements according to their negotiated terms, without imposing public policy limitations that might apply in more regulated jurisdictions. For example, a subordinated lender might have agreed that it will not enforce its security, will not declare a default, and will not object to amendments to the senior credit agreement, provided the senior lender certifies that such forbearance is necessary to preserve the going concern status of the company. This type of provision—which subordinates the subordinated lender's rights to the senior lender's judgment—is enforceable in Cayman under principles of contractual freedom and does not offend public policy.

Such enforceability is valuable in large acquisitions, where the layering of debt and the sophistication of intercreditor arrangements are key to managing the risk and cost of financing. Furthermore, Cayman law permits the creation of security interests in intangible assets (such as intellectual property, customer lists, or goodwill) and in receivables, without the formality or registration requirements that might apply in other jurisdictions. A sponsorship acquisition of a target with significant intangible assets can thus be financed through the security package derived from those assets, without the need to perfect the security through registration in multiple regulatory regimes. This flexibility in the creation and enforcement of security has made Cayman a preferred jurisdiction for secured lending generally, beyond the acquisition context, and is a factor in the continued use of Cayman vehicles in leveraged finance structures.

SPAC Transactions and Cayman Acquisition Vehicles

The rise of Special Purpose Acquisition Companies (SPACs) over the past five years has reinforced the role of Cayman acquisition vehicles in capital markets transactions. SPACs are shell companies that list on stock exchanges (in the US, typically the NASDAQ or NYSE) and raise capital from public investors with the stated purpose of acquiring an operating company. The SPAC acquires the operating company through a merger, and the result is a public company that is the former operating company, now listed and with the SPAC's capital base backing it.

Although many SPACs are incorporated in the US (Delaware), some are incorporated in Cayman, and Cayman law is often used for the acquisition vehicle that effects the merger with the operating company target. The Cayman statutory merger mechanism is particularly well-suited to SPAC transactions because it permits a clean, unencumbered merger of the SPAC and the target, with the merged entity inheriting the SPAC's public listing and the target's operating business. The flexibility of Cayman's share class rules also permits the SPAC to be structured with multiple classes of shares, representing different investor interests:

• sponsor shares (held by the SPAC's founders and sponsors);
• public shares (held by public investors);
• warrants (held by various investors, exercisable for additional shares on specified terms); and
• potentially founder earnouts (shares held in escrow and released contingent on the merged company achieving certain performance targets).

This complex capitalization structure, which would be difficult to implement under US corporate law or UK law, is routine in Cayman. Furthermore, Cayman's light-touch regulation of exempted companies permits SPAC sponsors to operate with minimal ongoing disclosure requirements, provided the SPAC has not been publicly listed in Cayman (most SPAC listings are on US exchanges). Once the SPAC is merged with an operating company and the combined entity lists or remains listed in the US, the combined entity becomes subject to US securities regulation, but its Cayman incorporation permits it to operate under Cayman corporate law (including Cayman rules on share transfers, shareholder meetings, and governance) without the need to comply with US state corporation law. This is a material advantage where the merged company intends to operate globally and does not want to be subject to any particular state's corporate law. The ability to use Cayman incorporation as a structuring vehicle in SPAC transactions has thus reinforced Cayman's position in the M&A and capital markets ecosystem.

Post-Acquisition Restructuring: Redomiciliation, Continuation, and De-registration

Following an acquisition, sponsors often contemplate restructuring the acquired company or the acquisition vehicle to optimise the post-acquisition financial and legal structure. Cayman law provides several mechanisms to facilitate such restructuring. A company can be redomiciliated from Cayman to another jurisdiction (or vice versa) through a process called continuation, provided the target jurisdiction's law permits continuation and a Cayman court approves the application. The company ceases to be a Cayman company and becomes incorporated in the new jurisdiction, but without triggering the dissolution and reconstitution that would ordinarily result from a liquidation and re-incorporation in a new jurisdiction. The continued company assumes all of the Cayman company's assets, liabilities, and legal personality.

Continuation is particularly useful if a Cayman acquisition vehicle has performed its function in the acquisition process and the sponsor now wishes to move the company to a different jurisdiction for tax, regulatory, or operational reasons. For example, a Cayman BidCo might be continued to Ireland post-acquisition, to benefit from Ireland's tax treaty network or to consolidate the holding company structure within an existing Irish corporate group. The continuation mechanism avoids the need to liquidate the Cayman company and create a new Irish company, preserving continuity of legal personality and contractual rights.

Similarly, a company can be de-registered as a Cayman exempted company without dissolution, if the company ceases to carry on business in Cayman. De-registration is a simplified procedure that removes the company from the Cayman registry and exempts it from Cayman's ongoing filing requirements, though the company remains liable for historical taxes and regulations. These restructuring mechanisms provide flexibility post-acquisition and permit sponsors to adjust the holding company structure as circumstances and business strategy evolve.

The Impact of Pillar Two and Economic Substance on Cayman Acquisition Structures

International tax standards have evolved materially in recent years, and the implications for Cayman acquisition structures are material. The OECD's Base Erosion and Profit Shifting (BEPS) initiative, and more recently the Pillar Two global minimum tax framework (agreed in late 2021 and implemented through the International Tax Competitiveness (Minimum Tax) Act in many jurisdictions), imposes a global minimum tax rate of 15% on the profits of large multinational enterprises.

Under Pillar Two, a parent company incorporated in one jurisdiction is subject to a 'top-up tax' if the subsidiary in another jurisdiction (such as Cayman) is subject to a lower effective tax rate. The assumption that a Cayman company is a pure tax-deferral vehicle is no longer valid under Pillar Two.

The implication for Cayman acquisition structures is that the tax advantage of using a Cayman company (which is taxed at 0% in Cayman) is partially offset by a top-up tax imposed in the parent company's home jurisdiction. If the sponsor is incorporated in a jurisdiction with a corporate tax rate of 25% (such as the UK), and the Cayman subsidiary has no income tax liability (0% rate), the effective tax rate at the group level would be brought up to 15% through the application of the top-up tax, even though the Cayman company itself pays no Cayman tax. This change does not eliminate the value of Cayman incorporation for acquisition structures, but it does moderate the tax arbitrage that previously existed. The neutrality and flexibility of Cayman corporate law remain valuable, and the absence of Cayman corporate tax remains relevant for capital efficiency in holding company structures.

Additionally, many jurisdictions (including the EU, the UK, and various other countries) have enacted economic substance requirements that impose limitations on the use of shell companies in tax-deferral structures. A Cayman acquisition vehicle is required to have a genuine business purpose and must conduct its affairs with sufficient substance to justify its separate corporate status. In acquisition contexts, this requirement is typically satisfied: the acquisition vehicle effects the acquisition, manages the target company's finances, arranges the financing, declares and distributes dividends, and engages in corporate restructuring. These are genuine business activities sufficient to meet economic substance tests. However, sponsors should ensure that the Cayman acquisition vehicle is not a mere shell without any substantive activity—if it is, challenges to the vehicle's economic substance may arise, potentially resulting in the vehicle being disregarded for tax purposes and the profits being attributed directly to the parent company. The practical implication is that sponsors should maintain adequate documentation of the Cayman vehicle's business activities, board meetings, and decision-making, to demonstrate economic substance if challenged. This is a modest compliance burden but is important to observe.

Conclusion: Cayman Remains a Compelling Acquisition Vehicle Jurisdiction

Despite two decades of competition from alternative offshore centres and despite recent changes in international tax standards, Cayman remains a compelling jurisdiction for acquisition vehicles in cross-border M&A. The combination of statutory merger mechanics that are transparent and reliable, constitutional flexibility that accommodates complex multi-investor capitalization structures, tax neutrality, light-touch regulation, and a sophisticated legal system that enforces complex commercial arrangements predictably, creates an ecosystem in which acquisition vehicles can be structured and operated with confidence.

A sponsor conducting a cross-border acquisition can use a Cayman BidCo to effect the acquisition through a statutory merger, can structure the TopCo's capitalisation with multiple classes of shares reflecting different investor interests, can arrange secured financing through intercreditor facilities, and can plan for post-acquisition restructuring or recapitalisation, all within Cayman's legal and regulatory framework. The Cayman vehicle is then merged into or holds the target company, resulting in a structure where the acquisition vehicle's flexibility and the target company's local incorporation (if desired) are both preserved.

Post-acquisition, the sponsor can manage the company's finances, distribute cash to investors, and plan for eventual exit through a secondary acquisition or public listing, all without the friction of public company or highly-regulated jurisdiction corporate law. The Pillar Two minimum tax does moderate the tax advantage of Cayman incorporation, but does not eliminate the value of neutrality and flexibility. Economic substance requirements require that the Cayman vehicle be operated with some business substance, but this is not onerous in the context of an acquisition holding company. For these reasons, Cayman-incorporated acquisition vehicles will likely remain the default structure for sophisticated cross-border M&A for the foreseeable future. Sponsors that are considering acquisition structures should understand the mechanics of Cayman corporate law, the statutory merger framework, the tax implications of Pillar Two, and the practical governance requirements that regulators and institutional investors increasingly expect. Lexkara & Co provides strategic legal counsel to financial sponsors, corporate treasurers, and deal teams navigating cross-border M&A, acquisition structuring, and the deployment of Cayman vehicles in complex financial arrangements.