Saturday, November 16, 2013

Reverse Merger and Its Features

Business Merger

Reverse merger is considered as the non-traditional method of going on public. Sometimes, this is considered as an easier route to keep the company alive and running. Not to mention, once a certain company can go public, it will have the opportunity to rise and keep up with its competitors again. Merging two companies can be exciting and interesting but it can also be stressful not only to the executives but also to the employees. Keep in mind that the moment the private company becomes a public shell company, change will be expected. Change for the company to be able to reach its goals. That is the truth behind the reverse merger process. It always is for the good of the entire company. 

Shell Characteristics

Part of the merger and acquisition strategies is to enable the company rise up after the process. Remember, as investors realize that a certain company is a public shell, it would work as a bait to attract more of them to invest to the company. Not to mention, they will begin to trust the company more than they used to. There are only two things to look upon when a company goes on public.

  • You may have an idea on the business acquisitions process, but once you learn more, you will be able to realize why recent corporate mergers take advantage of bringing two companies into one. Consider on an operating company that went public and then over a period of time, ceased its operations and its assets begin to liquidate. This is one thing that you should look upon why a public shell company exist.
  • Perhaps, a company that never started to operate and was formed from scratch became public for a specific purpose. 
Let's take a look on the two things or situations and determine which company will be able to build and rise up. In the former situation, company promoters is able to gain control of the company as they buy up the majority of the shares. Meanwhile, in the latter point, shell promoters usually incorporate a company as they incubate the shells. Usually, reverse merger is most unlikely to happen and be expected. Else, the company will choose the traditional method of going on public such as undergoing the process provided by the Security Exchange Commission via the Exchange Act. Promoters will be charging on the operating company a fee while the ownership interest retains in the shell. 

With regard to trading publicly, shells may or may not be able to have its stocks. The reason for a company to go on public may be complex but the process is simple. Keep in mind that it can be considered as a major decision when a certain company makes a full turn and becomes a public shell company. The reverse merger may be an advantage for the company or bring perils, however, either way, it will always allow the company to develop, gain more investors, generate on the lead, and most of all, rise and be on top as they have always been dreaming of reaching their goals. 

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