For more business and finance explainers, check out our Yahoo U page.

AT&T’s blockbuster deal to merge its content subsidiary WarnerMedia to Discovery Inc. made waves in the media industry. But the deal required a bit of financial acrobatics to pull off, involving a merger strategy known as a Reverse Morris Trust.

In a standard merger, a large company buys a small company.

But the Reverse Morris Trust deal allows Discovery (the smaller company) to absorb a major asset from AT&T (the larger company or parent company).

According to the terms of the transaction, AT&T (T) shareholders, who will continue to own shares of AT&T, will receive additional stock representing 71% of the combined Discovery/WarnerMedia company. Discovery shareholders of all three classes (DISCA, DISCB, DISCK) would have their shares converted to stock of a single class in the new combined company, representing the other 29%.

AT&T will also get $43 billion in cash, debt securities and WarnerMedia’s retention of certain debt.

The maneuver also has one major benefit: no taxes for the parent company and its shareholders.

How does a Reverse Morris Trust work?

In a Reverse Morris Trust deal, a parent company creates a subsidiary containing the assets negotiated as part of the merger (also referred to as a “spinoff”). That subsidiary then merges with the outside company that agreed to the deal.

A key requirement in a Reverse Morris Trust deal is for the shareholders of the original parent company (the one that spun off the subsidiary) to be given a majority of shares in the new company.

If shareholders of the original parent company are not given a majority of shares, then the deal is not a Reverse Morris Trust transaction and therefore may be taxable to the parent company and its stockholders.

The name comes from a 1966 court ruling that established the precedent for taxing such transactions.

Is a Reverse Morris Trust transaction common?

Reverse Morris Trust deals are far from the most common way to do an M&A deal. Recent transactions include Lockheed Martin’s deal with Leidos Holdings, Hewlett Packard Enterprise’s deal with Computer Sciences Corporation, and Citrix Systems’ deal with LogMeIn.

One challenge with a Reverse Morris Trust is finding the right fit. By design, the outside company effectively has to be smaller than the subsidiary that’s spun out by the parent company (in order to make sure that the parent company’s shareholders get more than a majority of shares in the new company).

But if the outside company is too small, the parent company may have just found it more feasible to purchase it outright.

AT&T appeared to see Discovery as the right size — not too big and not too small — to get the deal done.

Read and watch more of Yahoo U here

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.