roshcrazy
Roshni Bhatia
Mergers and Acquisitions have turned out to be a major tool in the hands of companies to expand, to survive cut-throat competition, and to diversify. Companies are using M&A for another reason, to get listed on the Stock Exchange even if they are not eligible to get listed through the usual route of an IPO. This process is called Reverse Takeover.
A reverse takeover, also known as a back door listing, or a reverse merger, is a financial transaction that results in a privately-held company becoming a publicly-held company without going the traditional route of filing a prospectus and undertaking an initial public offering (IPO). Rather, it is accomplished by the shareholders of the private company selling all of their shares in the private company to the public company in exchange for shares of the public company.
Reverse Merger offers various advantages like bypassing Listing Qualifications, mitigating market risk of listing through an IPO, lower costs incurred for listing etc. Reverse Mergers have their share of disadvantages like skepticism of markets towards Reverse Mergers, the private company can never be sure if there are any hidden liabilities in the formerly public company.
Reverse Mergers have some serious implications for the Financial Markets & Institutions. Companies through reverse merger are listed on the Stock Exchanges and do not need to meet filing requirements as a fully reporting company. They do not need to meet stock exchange listing requirements, such as earnings and net capital requirements.
A reverse takeover, also known as a back door listing, or a reverse merger, is a financial transaction that results in a privately-held company becoming a publicly-held company without going the traditional route of filing a prospectus and undertaking an initial public offering (IPO). Rather, it is accomplished by the shareholders of the private company selling all of their shares in the private company to the public company in exchange for shares of the public company.
Reverse Merger offers various advantages like bypassing Listing Qualifications, mitigating market risk of listing through an IPO, lower costs incurred for listing etc. Reverse Mergers have their share of disadvantages like skepticism of markets towards Reverse Mergers, the private company can never be sure if there are any hidden liabilities in the formerly public company.
Reverse Mergers have some serious implications for the Financial Markets & Institutions. Companies through reverse merger are listed on the Stock Exchanges and do not need to meet filing requirements as a fully reporting company. They do not need to meet stock exchange listing requirements, such as earnings and net capital requirements.