How To Do A Reverse Merger?
By Sebastian Amieva
A reverse merger is a type of corporate transaction in which a private company merges with a publicly traded shell company, allowing the private company to go public without going through the traditional initial public offering (IPO) process. Here are the steps typically involved in a reverse merger:
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Identify a publicly traded shell company: A publicly traded shell company is a company that has gone through the IPO process and is listed on a stock exchange, but does not have any significant assets or operations. These companies are often referred to as "blank check" companies because they have no specific business plan and are essentially a "shell" that can be used for a reverse merger.
Negotiate the merger: The private company and the publicly traded shell company will need to negotiate the terms of the reverse merger, including the exchange ratio (how many shares of the private company will be exchanged for each share of the shell company) and the management and governance structure of the resulting merged company.
Complete due diligence: Both the private company and the shell company will need to conduct due diligence to ensure that the merger is in their best interests. This may involve reviewing financial statements, legal documents, and other relevant information.
File regulatory documents: The merger will need to be approved by the relevant regulatory authorities, and the companies will need to file the necessary documents to obtain this approval. This may include a Form S-4 (Registration Statement) with the Securities and Exchange Commission (SEC) in the United States.
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Close the merger: Once all the necessary approvals have been obtained and the terms of the merger have been finalised, the companies can close the deal and the private company will become a publicly traded company.
Integrate operations: After the merger is complete, the companies will need to integrate their operations and systems to become a single entity. This may involve consolidating operations, merging management teams, and implementing new processes and systems.
Here are a few examples of reverse mergers:
Virgin Media: In 2006, telecom company Virgin Media (then known as NTL) completed a reverse merger with entertainment company Liberty Global, becoming a publicly traded company as a result.
Alibaba Group: In 2014, Chinese e-commerce giant Alibaba Group completed a reverse merger with the Hong Kong-listed company China Yuchai International, becoming a publicly traded company on the Hong Kong Stock Exchange as a result.
NXP Semiconductors: In 2010, semiconductor company NXP Semiconductors (then known as Freescale Semiconductor) completed a reverse merger with privately held company Tessera Technologies, becoming a publicly traded company as a result.
Burger King: In 2002, fast food chain Burger King completed a reverse merger with Canadian restaurant holding company Imasco, becoming a publicly traded company as a result.
Virgin Galactic: In 2019, space tourism company Virgin Galactic completed a reverse merger with special purpose acquisition company Social Capital Hedosophia, becoming a publicly traded company as a result.
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Sebastian Amieva
Founder
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