At some point of time, the top managerial of a private corporate enterprise may feel the need to go public in order to take advantages of economies of scale. Taking such a step allows them to get the funds they need to expand their operations in the marketplace. They then go out of their way to invite the public to subscribe to the shares they issue via an initial public offer (IPO) after completing all necessary legal formalities for the conversion. Adopting such a strategy cam go a long way in enhancing the establishment’s profile. However, many of them may soon find out that the process can time-consuming, complex and very expensive. Fortunately, prominent experts in this field point out that it is possible for them to take advantage of a viable alternative in the form of a reverse merger.
Larry Polhill –advantages of reverse mergers
Larry Polhill is a retired consultant from Arizona with almost 30 years of experience in the fields of real estate management, corporate finance, company mergers and acquisitions. At the height of his career, he held the posts of ‘Director’, ‘Chairman to the Board of Directors’, ‘Chief Executive Officer’ and ‘President’ in various corporate organization. These include Photocircuits Corporation, American Pacific Financial Corp. (‘APFC’), Capital Foods, LLC and Cafe Valley, Inc. He explains a reverse merger takes place when a private company goes out of its way to take over a dormant public company which is on the verge of bankruptcy. In the process, the private corporate enterprise gets the same status of the organization it acquires even if it has no assets. He goes on to point out the two most important advantages of reverse mergers are as follows:
- Cost-effective and convenient
The top managerial personnel of private companies find that in comparison to issuing a traditional initial public offer(IPO) in the market, reverse merger is a more viable option. This is because the procedure is more cost-effective and there a fewer legal requirements to comply with than the former. This makes it convenient for organizations who are not in a rush to raise large sum of money but have the potential for future growth.
In comparison to issuing an initial public offer, reverse mergers offer the top management of private companies more certainty. The people responsible for operating such establishments need to take into account the prevailing conditions in the market when they opt to invite the public to buy the share they issue. They are aware that the volatility of this environment can easily render their entire hard work to launch an initial public offer useless. This is not so in the case of a reverse merger.
Larry Polhill points out that private companies willing to enter into a reserve merger agreement first need to look for a dormant public company which in on the verge of sale or bankruptcy. In the present economic situation, the top management of such corporate enterprises may find such organizations are not difficult to find. They then need to hire reliable professionals in the field of accounting and corporate law to ensure they comply with the necessary legal requirement in order to enjoy the above two benefits.