reverse merger
A reverse merger is a procedure used by private companies to go public without the formal registration process required of an initial public offerings (IPO), in which the private company combines with a public shell company.
In a reverse merger, the private company typically acquires a controlling interest in the public shell company, allowing it to direct the public entity through the private company’s owners and management. As part of this process, a share exchange occurs in which the shareholders of the private company become controlling shareholders of the public entity.
A reverse triangular merger is a common type of reverse merger in which a public shell company forms a wholly owned subsidiary that merges with the private company. Following the merger, the private company becomes a subsidiary, and the public shell company acts as a holding company and remains as the publicly traded parent company.
Reverse mergers are seen as advantageous in that they are less expensive, faster, and have less disclosure requirements than a traditional IPO. Once the company is public, however, it must comply with the regulatory requirements of the Securities and Exchange Commission (SEC) for public companies.
[Last reviewed in March of 2026 by the Wex Definitions Team]
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