reverse acquisition

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Reverse Acquisition

An act where a private company purchases a publicly traded company and shifts its management into the latter. It also normally involves renaming the publicly traded company. This allows private companies to become publicly traded while avoiding the regulatory and financial requirements associated with an IPO. In order for a reverse acquisition to happen smoothly, the publicly traded company is usually a shell corporation, that is, one with only an organizational structure and little or no activity. The two businesses can then merge the private company's product(s) with the public company's structure. It also makes initial trading less dependent on market conditions, a key risk in IPOs. However, it is important to note that a reverse acquisition only provides the private company with more liquidity if there is a real market interest in it.

reverse acquisition

An acquisition in which the company taken over becomes the surviving entity. A reverse acquisition is sometimes used to acquire and convert a private company into a public company without being required to go through a lengthy registration process.
References in periodicals archive ?
If a transaction qualifies as a reverse acquisition, the acquirer's group terminates its existence as of the close of the date of the acquisition, and the target's group continues to exist and files a consolidated return with the acquirer as the new common parent of the combined group.
A reverse acquisition may result from a variety of tax-free transactions (e.
Aside from the issue of which group or corporation survives, a reverse acquisition also affects other consolidated return issues, such as the application of the separate return limitation year rules, stock basis adjustments under Regs.
Consistent with the substance-over-form concept of the reverse acquisition rules, the IRS has advocated analyzing the underlying substance of Regs.
1502-75(d)(2)(ii) (which applies only to situations in which the common parent ceases to exist) or a reverse acquisition under Regs.
1502-75(d)(3), a reverse acquisition results in the termination of the acquiring group of affiliated corporations (known as the old group) and the continuation of the target corporation's affiliated group.
Any corporation that was a member of a consolidated group (the terminating group) and ceased to be a member of such group solely as a result of a transaction in which a member of the terminating group acquired (a) the assets of a nonmember corporation in a type A, C or acquisitive D reorganization or (b) the stock of a nonmember corporation, and the acquisition was a reverse acquisition in which the terminating group ceased to exist.
The acquisition is not a reverse acquisition because the former X shareholders, as a result of their X stock ownership, do not own more than 50% of the fair market value (FMV) of the outstanding V stock.
The acquisition is a reverse acquisition because the former X shareholders, as a result of their X stock ownership, own more than 50% of the FMV of the outstanding V stock.
P merges into B in a transaction that is not a reverse acquisition.
Example 12: On January 1, 1989, P, the common parent of an affiliated group, is acquired in a reverse acquisition by X, a common parent of a separate affiliated group.