The Viability Of Reverse Mergers In Florida Business Law
Mergers & acquisitions (M&A) is a constantly evolving field of law, requiring attorneys to be well-versed in every little detail. A merger is a different animal than an acquisition, though they may share procedural similarities. A reverse merger is a specific type of merger, and while it may seem confusing, it can be the best possible choice for private companies in certain specific situations. Determining whether a reverse merger might benefit your company is a decision that requires help – and possibly legal assistance.
Merger vs Acquisition
Historically, the best way for a business to ‘go public’ was to undergo what is known as an Initial Public Offering (IPO) – to offer shares of its stock for public trade for the first time. However, this is not always the best choice for certain businesses, particularly if your company does not have much of a brand name or presence. It is generally not recommended to try and file for an IPO if your business has not built up goodwill or word of mouth – or, for that matter, some limited capital.
A reverse merger starts as an acquisition, rather than a merger – in order to acquire that brand name and/or public presence, a private company acquires a public-facing company, usually with limited assets. Once the private company has completed the purchase of the public-facing company, the two merge into one public business (either under the old name, or a new one) and begin public trading.
Pros & Cons
In general, ‘going public’ via any method is recommended for any business that wants to have a widespread clientele. It does mean that your business must be more transparent and disclose more about its operations, but in turn, that transparency is more likely to attract more investors. Oftentimes, a reverse merger can be completed more quickly than an IPO, which means that a business can start to build a reputation in short order.
If your business is in need of a reputation, and can handle the potential costs associated with the reverse merger procedure, it may be a good option. However, it is not uncommon for there to be unexpected delays or liabilities in a reverse merger, and given that reverse mergers are subject to less scrutiny than IPOs, the possibility of mistake or omission in terms of regulatory compliance may be higher. Regardless of your confidence in your own business, it is a good idea to consult an attorney.
Call A Seminole, FL Mergers & Acquisitions Attorney
If you are uncertain as to the best path forward for you and your business, contacting a Florida mergers & acquisitions attorney is a good first step. The Hunt Law Group has handled these types of cases before, and can try to assist you with yours. Contact our office at (727) 471-0444 to schedule a consultation.