Question

The majority of M&A deals never appear in the financial press because they involve small, privately held businesses or family-owned businesses. What are some of the reasons a family owned or privately held firm may want to go public, i.e. through a reverse merger? Can you think of any reasons that discourage such firms from going public?

Answer 1

For private companies to turn into public the process is too long and complex hence following this procedure becomes challenge for small, private and family owned business, instead they acquire the public company through reverse merger which help them avoid the lengthy and complex process of going public where the main requirement is reorganisation of capital.

The reason that discourage private firms going public

• The company need to raise the funds hence going public is an expensive process
• Compliance to high regulatory rules and regulations
• Can increase the liabilities of the business
• Need high focus of the management
• Increase in reporting standards
• Time consuming process