Here at the Law Offices of Levi Williams, P.A., many Broward County companies have come to us seeking assistance to help grow through mergers and acquisitions. One aspect of business growth of which few know is a reverse merger. This happens when a private company merges with a dormant public company that has already gone through an initial public offering. If you’re looking to take your company public, this could be an option for you to consider.
The E-Commerce Times reports that as recently as 2008, the total valuation of reverse merger transactions that occurred worldwide hit $8.36 billion. Many have predicted that going forward, this could potentially overtake the IPO approach as the preferred way for companies to public in the corporate marketplace. Why should you consider a reverse merger over an IPO? Here are just a few reasons:
- The reverse merger process can be completed in as quickly as four months, where an IPO can take up to a full year.
- The accelerated transaction process can help you to see quicker returns on your venture.
- Because the public company is dormant, you’re often able to retain a greater ownership stake in your business than those of other publicly-traded companies.
In order to initiate a reverse merger, you must find a dormant public company (often called a “shell corporation”) to merge with. Oftentimes, these companies are advertised for sale online. Any public shell you consider merging with must still be in good standing with the SEC and free of any liens or tax liabilities. Thus, it’s important to do your due diligence in investigating the shell to be acquired.
You can find more information about growing your business through a merger on our site.