Pros and cons of reverse mergers | Veazey Felder & Renegar LLC
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Pros and cons of reverse mergers

Many people who are responsible for running a business in Louisiana are constantly searching for ways to make the company grow and become more profitable. That may, in fact, be the mission statement for any businessman or businesswoman in Louisiana. In many cases, mergers and acquisitions are considered as a means of accomplishing these goals. One particular type of merger that some may consider is known as a "reverse merger."

In a recent article, the pros and cons of reverse mergers were debated. For those among our readers who don't know, a reverse merger is an option for privately held companies to become publicly traded companies. It is essentially a three-step process.

First, the owners of the privately held company will identify a publicly traded "shell" company in which they can purchase a majority of ownership shares - the owners of the private company become the majority owners of the publicly traded company. Next, the publicly traded company then merges with the privately held company. The result? The once privately held company is now a part of a publicly traded company.

The good points about this process is that it can oftentimes be accomplished rather quickly and cheaply. However, the process can be rife with legal and tax complications. Privately held companies that are investigating a reverse merger as a means of becoming publicly traded will probably need to get more information about the legal and tax implications of such a move. Due diligence is still a large part of this type of merger, just like any other.

Source: The North Bay Business Journal, "Reverse mergers offer companies quick route to going public," James Dunn, June 20, 2016

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