Reverse Takeover

Reverse Takeover

An act in which a private company purchases a publicly traded company and shifts its management into the latter. This allows a private company to become publicly traded while avoiding the regulatory and financial requirements associated with an IPO. In order for a reverse takeover 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 takeover only provides the private company with more liquidity if there is a real market interest in it.