Reverse Take Over (RTO) simply refers to a back door to market for down going companies when they are not performing well in the market place. Reverse Take Over is one way to going public via bypassing reversing IPOs (Initial Public Offer) of the company, where a private company takes over all the shareholders worth of particular public company by transferring large numbers of shares and securities. This Term is refers as Reverse Take Over (RTO) and Reverse merger and Reverse IPO also.
In simply we can say that if a private company is going to be public it is Reverse Take Over. Here the authority to control company is also transfer to newer one, Therefore there is a change of control from public to private. Let’s see what are the advantages and disadvantages of this.
Advantages of Reverse Take Over
- Banks and financial institutes allow some percentages of rebates and discount to the company in case of Reverse Take Over happens. By which new comers may get some benefit as compared to paying all the financial values to the banking sectors.
- The financial help could be increase with getting help of already taken over company. By the shares and property’s worth.
Disadvantages of Reverse Take Over
- The name of the ex-company may affect the new strategies coming through new owner. It either be better or may be negative for the company who taken over the market.
- The shareholders of the existing company will lose their confidence in the investment part of the company. Because they will sure have some points of the future investment on that company also.
A reverse take over is an attractive planned option for the management of private companies to gain the market value of the public company status. This process of gaining control over another company is more better option for the existing valued companies to grow more because it is less time consuming and less costly instead of conventional IPO because we do not have form a company and its name or everything is just readymade. While these situation a public companies get more plus points with the financial supports in reverse merging or take over where the second option easily come out. Here also the shareholders enjoy much liquidity options while trading and many new services gain from investment banking sectors due to merging or take over.
Advice for a Successful Take Over
Before taking any step ahead to target any company we must have to take care about some things which can help us to a successful take over.
- Prepare Projects : Making projects about to which company we have to target would be more beneficial in case of take over, here we have to be more confident about the plans of the company to which we are going to target.
- Never Take Over a Business of Own : Suppose in the market we have various categories of business in different places, here we do not have to play with our self it may cause our overall reputations of whole business. So never targeting own business.
- Precisely Defining the Target : Who is your target this is a big question, which will be the best to target well without harming our self. So be planned with target is most important to us otherwise we have to pay for it our own business.
- The Seller Chooses the Buyer : If we have targeted a company or a firm successfully which is going to sell itself then we need to be the best buyer in the market when seller is going to sell the firm. Here buyer is who wants to take over a firm & seller who are going to merge with buyer for a value.
- Act as a Risk Manager : After dealing with the sellers we have to act as a risk manager of the firm so that we are now have some percentage of success in our hand.
- Having Legal Acknowledgement of Tax & Finance : Before taking over precisely we get know about the legal acknowledgement of the company’s legal must like taxation and financing ability.
- Be Aware About the Legalities : Be preparing with the lawyers and registrar who will help us to legally taking over a company using agreements and legal documents.
- The Price Must Matter Here : See what price you have to pay here for the successful take over because if we left here than any other company will take over this by bidding that much or more over prices.
- Financing for Take Over : At the last we have to finance the firm for the take over to the existing owners and co-owners where this would be the last step. After financing the firm will successfully taken over. Note a thing without financing there is no take over.
- After Take Over Adapting to it : Now at the end this is on you what to do with these firm or industry. There are things we can do here like selling that firm again to another company with more high price, selling the assets or equipment and making another firm there or using our own business there.
Some Examples of Reverse Take Over Companies
- Ted Turner merged with Rice Broadcasting which becomes Turner Broadcasting.
- US Airways merged with America West Airlines.
- ABC Radio merged with Citadel Broadcasting Corporation.
- NYSE merged with Euronext which becomes NYSE Euronext.
Finally, Any individual who are in the industry with expert knowledge and many practices gets much experience so they all believe in getting control over other companies without investing start up investments and run them as per their knowledge.