Reverse Mergers

An acquisition in which the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes is considered a reverse merger. The entity whose equity interests are acquired (the legal acquiree) must be the acquirer for accounting purposes in order for the transaction to be considered a reverse acquisition. The identification of the accounting acquirer and acquiree requires significant judgment and an understanding of the relevant accounting literature, and it often also involves communication with the Securities and Exchange Commission. Opportune has significant experience with all aspects of reverse mergers including:

  • Pre-transaction due diligence and quality of earnings assessments
  • Technical analyses and documentation regarding the qualification and financial reporting for a reverse merger vs. recapitalization
  • Drafting SEC pre-clearance letters to confirm financial reporting conclusions
  • Drafting responses to SEC comment letters
  • Independent valuations & purchase price allocations of the accounting acquiree
  • Step-up in basis and related deferred tax provision of the accounting acquiree
  • Income tax expense due to the accounting acquirer’s change in tax status
  • Drafting all SEC documents and disclosures related to the transaction:
    • Proxy Statement and S-4 disclosures
    • Form 8-K and 8-K/A disclosures
    • Historical and pro forma financial statement presentations
    • Footnote disclosures, including pro forma SMOG
  • Business integration:  systems, processes and people