Companies of any size should never enter into merger and acquisition agreements without the right legal firepower. Such transactions can be complex, and protecting the interests of the company, the customer, the shareholders and the investors is important. One type of merger that can be especially complex is the reverse merger.
A reverse merger occurs when a private company is merged into a public company, but the private company actually takes the lead after the merger. Typically when a larger, publicly traded company merges with a private company, the transaction is akin to the larger company taking in the assets and liabilities of the private company and perhaps holding onto some human resources.
In the case of a reverse mortgage, the leadership of the private company retains control after the merger though the combined company now goes by the branding of the publicly traded company. This might occur if a publicly traded company sees a need for a changing of executive guard or if the private company holds many of the merger cards because it brings a specific innovation or product to the transaction.
One benefit for investors in the private company is that their investments are converted into shares in the new publicly traded company. Investors who don't want to go along for a long-term ride with the merger have an out because they can always sell their shares.
Whether you are an investor caught in the merger process or a business contemplating a big change, make sure your legal options are clear. Our firm works with businesses of all types to ensure legal details are paid attention to and future risks are mitigated.