In this case, the private company acquires sufficient shares in a public limited company for it to have the power of control. Then the shareholders of the private company exchange their shares in the private company for the shares of the public limited company. This allows the private company to become truly public and avoid the costly and time-consuming IPO process. This process is also called “Reverse Merger” or “Reverse IPO”. The IPO of a reverse acquisition allows a private company to go public at a lower cost and with less dilution of shares compared to an initial public offering (IPO). While the IPO and capital raising process is combined in an IPO, these two functions are separated in the event of a reverse acquisition. In the case of a reverse takeover, a company can go public without raising additional capital. The separation of these two functions greatly simplifies the process. · A reverse takeover as an exit strategy of venture capital: Korean evidence, Kim, I., &Chang, Y.
K. (2014). Pacific Basin Finance Journal, 29 years old, 182-198. This paper examines the characteristics of companies that have chosen between three main but different methods (IPOs, reverse acquisitions, balances) to obtain the stock exchange listing by resuming the use of Korean data during the period 2000-2010. According to the paper, VC-backed companies choose reverse acquisitions over sales or IPOs to go viral after controlling for other determinants. The result of this paper shows that venture capital accepts the use of a reverse acquisition as an alternative exit point, as it emerges from its portfolio that the reverse acquisition is an inexpensive and quickly IPO method. A Reverse Merger may be easier, but also requires compliance with regulations and due diligence to be successful. The usual way to be listed by Initial Public Offering takes months to years due to various regulatory requirements, while listing can be done by reverse takeover in a matter of weeks. It helps the management of the company to save time and effort. · Reverse Takeover: the moderating role of family ownership, Feito-Ruiz, I., Cardone-Riportella, C., &Menéndez-Requejo, p. (2016).
Applied Economics, 48 (42), 4051-4065. This paper analyzes the determinants of reverse acquisitions by examining the influence of the target company`s Type I on the specified agreement. Reverse takeovers, which were implemented in the alternative investment market of 1999-2012, were studies in this research work. Particular attention was paid to the differences between non-family and family target businesses, as well as to the influence of the financial crisis. It has been suggested that family businesses have lower profitability if they accept a reverse acquisition in order to prevent new shareholders from entering the companies and diluting ownership structures. The conventional IPO process does not guarantee that the company will eventually go public. Managers can spend hundreds of hours planning a traditional IPO. But if stock market conditions become unfavorable to the proposed offer, the deal can be canceled, and all those hours will amount to a wasted effort.