Reverse Acquisition

Brief Definition

A reverse acquisition is a process where a private company acquires a publicly traded company to bypass the lengthy and complex process of going public through an initial public offering (IPO). In this transaction, the private company becomes publicly traded almost immediately.

Further Explanation

A reverse acquisition is a process where a private company acquires a publicly traded company to bypass the lengthy and complex process of going public through an initial public offering (IPO). In this transaction, the private company becomes publicly traded almost immediately. Although the private company is technically the acquirer, it is often the smaller entity compared to the public company. Post-acquisition, the private company’s shareholders usually gain control of the public company. This method is favored because it is quicker and often less costly than an IPO.

Example:
If a private tech startup wants to go public, it can acquire a publicly traded shell company (a company with no significant operations). After the acquisition, the startup’s shareholders hold most of the shares in the combined entity, effectively making the startup a publicly traded company without going through the traditional IPO route.