Reverse Acquisition

An alternative method to a Private Placement is to go public thru a reverse acquisition is a type of business combination in which a private company acquires a public company, allowing the private company to bypass the lengthy and complex process of going public. In a reverse acquisition, the entity issuing securities is designated as the acquiree for accounting purposes. The public company is often a shell company with few or no operations, and the private company acquires a controlling interest in the public company by purchasing most of its shares. The resulting public entity is then managed by the formerly private company's management team, and issues all public filings expected of a publicly held entity.

Reverse acquisitions can be less expensive and less time-consuming than traditional initial public offerings (IPOs). They also allow a privately held company to become publicly held with less stock dilution and without raising additional capital. However, reverse acquisitions come with some history and some shareholders, and sometimes this history can be bad and manifest itself in the form of currently sloppy records, pending lawsuits, and other unforeseen liabilities. Additionally, there is unlikely to be much of a market for the entity's shares, making it difficult for investors to sell their shares.

Capital Strategies

Reverse Acquisition