Reverse merger


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Related to Reverse merger: Reverse Triangular Merger

Reverse Merger

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 merger 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 merger only provides the private company with more liquidity if there is a real market interest in it.

Reverse merger.

In a reverse merger, a privately held company purchases a publicly held company and, as part of the new entity, becomes public without an initial public offering (IPO).

It's described as reverse because in the more typical merger pattern a public company purchases a private company to expand its business.

References in periodicals archive ?
This reverse merger will result in a company with USD 82m in cash.
According to the company, becoming a public company is a key element of its growth strategy and the completion of this reverse merger is a significant accomplishment for it.
A company that uses a reverse merger to go public generally would like to structure the merger as a tax-free reorganization under Sec.
The PharmaMar reverse merger with Zeltia had been approved in the Annual Shareholders meeting of Grupo Zeltia in accordance with the proposal of the Board of Directors.
The PCAOB research revealed that 159 companies from China had accessed US capital markets through a reverse merger between January 2007 and March 2010, representing 26 percent of all deals of this kind.
140) A reverse merger then would allow start-up companies to keep more equity in their company and raise money in a more cost-efficient manner.
As a result of this reverse merger, CelLynx is now the company's sole business and CelLynx shareholders own approximately 61.
Ownership Dilution: A reverse merger requires the owner of a private company to sell a percentage of his company to either the investment bankers or shell owner.
In addition to focusing on the process of the reverse merger and the financial returns to various investor groups, this case examines how recent SEC actions may affect future reverse mergers.
As the hurdles for an initial public offering (IPO) have grown steeper in the post-tech bubble world, the reverse merger has become an increasingly popular way for private companies to go public.
An alternative is a reverse merger in which a privately held company acquires a controlling interest in a publicly traded company that is dormant, or nearly so, and usually has few, if any, assets.
The deal is a reverse merger, a procedure under which a privately held company takes control of a listed company and becomes public.