![]() ![]() Firstly, you can usually complete a reverse merger fairly rapidly. If you're considering taking your private company public, learning about some of the advantages of reverse mergers is a good idea. ![]() Securities issued to shareholders of the private company should either register under the Securities Act or should use an exemption. The private company will not become a public company until they have done so. Within four days after the reverse merger transaction is complete, the public company must file Form 10. The SEC maintains multiple reporting requirements that apply to reverse mergers. Structuring a reverse merger in this way allows the public company to avoid the Securities Exchange Act's proxy requirements for mergers. With a reverse triangular merger, it is usually easier to obtain consent from company shareholders because the new subsidiary company has only one shareholder: the public share company. Shareholders exchange their shares in the private company for those in the public company, and the private company is now a wholly owned subsidiary. With this structure, the public shell company creates a subsidiary company which then merges with the private company. Triangular Mergers and Reporting RequirementsĪ reverse triangular merger is the most common form of reverse merger. The result of this process is that the private company has become a public company without having to make an IPO. Once this has occurred, the public company takes over the private company's operations. The shareholder may also transfer their shares to the private business. The shareholder who owned a controlling share of the public company before the merger will usually give their shares back so that they can be canceled. ![]() If the process is successful, your private company will be the public company's wholly owned subsidiary. Upon completion of the transaction, the former shareholders of your private company will possess a majority of shares in the public company. It has nominal assets, no assets, or only cash assets.ĭuring a reverse merger transaction, the shareholders of your private company will swap their shares for existing or new shares in the public company.It has nominal operations or no operations at all.A shell company has three characteristics according to the Securities and Exchange Commission (SEC): The company with which you merge can either be a public operating company or a public shell company. With a reverse merger, your private company would purchase a controlling stake in a public company and then merge with that company. If you're worried about the drawbacks of going public by making an IPO, you could take your company public using the reverse merger process. However, the drawback of going public is that anyone will be able to purchase stock in your company, which can dilute your control. How Does a Reverse Merger Work?Īfter your privately held company has reached a certain size, you may want to go public. Instead of making an initial public offering (IPO), the company will merge with another company that has already gone public. Reverse Merger AdvantagesĪ reverse merger transaction is an option for a company that has an interest in going public. Triangular Mergers and Reporting Requirements 3. ![]()
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