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Mergers, Reverse Mergers, Acquisitions, and Regulation A (JOBS Act) Funding

While there is certainly a great deal of excitement and public notarize involved in launching a new IPO, there are other ways to “Go Public” which might just be more suitable to your company’s particular situation or need. Certainly you have plenty of options, but accessing the shareholder value and liquidity of the public markets can also be accomplished through mergers and acquisitions or as it is typically referred to M&A.

rectangle[1]M&A can be defined as a type of restructuring in that the desired result in some mutual collaboration and entity reorganization with the aim to provide sustained growth or positive shareholder value. Here are three types of some common methods used for changing a company’s structure and what they mean:

MERGER – From a legal point of view, a merger is a legal consolidation of two companies into one entity to form a new company. A merger is the voluntary amalgamation or joining of two firms on mutually agreeable terms into one new legal entity. Mergers are effected by exchange of the pre-merger stock (shares) for the stock of the new firm. Owners of each pre-merger firm can continue as owners, and the resources of the merging entities are pooled for the benefit of the new entity. If the merged entities were competitors prior to the merger, the merger is called horizontal integration, if they were supplier or customer of one another, it is called vertical integration.

REVERSE MERGER – A reverse merger is the acquisition by a public firm (typically, only a shell company) of a private firm by transferring over 50 percent of its own stock (thus, handing over its controlling interest) to the private firm. This type of merger is used by private companies to become publicly traded without resorting to an initial public offering. A shell company is one where in essence almost all of it’s original or previous functions, operations, management structure and so on are non-working and all that exists of the original company is its organizational structure, or shell.

ACQUISITION – An acquisition is the purchase of one company by another in which no new company is formed. It is taking custody of records and taking possession of an asset by purchase. In an acquisition, one company takes control of another firm by purchasing 51 percent (or more) of its voting shares and establishing itself as the new owner (in which case the target company still exists as an independent legal entity controlled by the acquirer).

Which is right for you? Request free information on how our Reg. A advisory services can take your company to where you want it to be!