What are reverse mergers?

What are reverse mergers?

On Behalf of | Jul 6, 2018 | Uncategorized |

Investors and entrepreneurs in the Baton Rouge area are often looking for new and different ways to access new markets and sources of funding. After all, one of the critical elements of keeping a business going is maintaining a broad pool of creditors and investors who are willing to take a risk on the person’s business. Without having funding, a business is going to die quickly.

One way a business can get access to the funding, properly called capital, is that it needs to operate through what is called a reverse merger. While a reverse merger involves complicated sale of business that will likely require the assistance of an attorney, it basically involves a private firm or group of investors taking control of a public company, that is, one with stock offered on the open market.

Technically speaking, though, it is the private company that willingly gets absorbed into the public company. The publicly offered company being sold will usually not have existing business operations at the time of the purchase. This enables the private company’s leadership to use the pubic company to conduct their business operations.

The advantage to reverse mergers is that they give a private company the ability to seek investment capital on the open public market without having to go through all of the red tape of formally transforming the private firm in to a public one. Still, as mentioned, reverse mergers are complicated and require a great deal of legal work and careful preparation.

Not attending carefully to the details of the merger could lead to significant legal and even financial troubles. This is why one exploring the possibility of a reverse merger should strongly consider seeking out the advice of an experienced Louisiana business law attorney.