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Reverse Business Merger is an Alternative Way to Obtain Funding

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Mergers & Acquisitions on Monday, May 5, 2014.

Startup companies have many challenges to overcome when starting a new business. One of the most common and significant challenges facing a startup is obtaining venture capital in California or in any other state. Many times there are more startups looking for funding than there are venture capital and Angel investors available. However, one unorthodox method of obtaining capital, which has gained some popularity recently, is using a business merger to garner funding.

However, startups looking to go this route are engaging in a specific type of merger known as a reverse merger. This type of merger is usually utilized in order to avoid the process and expenses related to an Initial Public Offering (IPO). Usually, a dormant shell company is chosen for this type of transaction. However, there are many shell companies that have less than pristine histories; therefore, it is important to properly research a shell company’s past in order to avoid any unforeseen liabilities.

Also, many public shell companies that are ready to be sold are not listed by NASDAQ, but instead are traded on less prestigious avenues. For example, the OTC Bulletin Board is a common place where shell companies are listed instead of the NASDAQ. Although these companies can be renamed and moved to the NASDAQ, this may end up negating any savings on expenses and time, which would be the original intent of a reverse merger.

Additionally, one must be sure to follow all proper rules and regulations when completing a business merger of any kind in California or any other state. This means having full knowledge of applicable laws. Incorporating a compliance strategy into one’s business plan will help to avoid future lawsuits and criminal charges, which would be highly detrimental to any business.

Source: Forbes, “Is A Reverse Merger The Way To Fund Your Startup?“, Martin Zwilling, May 2, 2014

business funding, IPO, Mergers & Acquisitions, reverse merger, shell companies

California Real Estate Company Expands With Business Merger

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Mergers & Acquisitions on Thursday, November 14, 2013.

There are a variety of methods that a company may utilize in order to expand its share of the market. Some of these may include marketing, advertising or strategic property purchases. However, many times the best way to do this is through a business merger. This is what one California real estate company has decided to do in its recent merger with another real estate company.

The company, TRI Pointe Homes, is in the middle of finalizing its merger with Weyerhauser Real Estate Co. The merger is estimated to be a $2.7 billion deal and will give TRI Pointe Homes a larger control of the nationwide real estate market. The deal will bring an additional 27,000 properties into the company’s real estate portfolio. Approximately 16,000 of these properties will be located in California, which will make the company a significant force in the state’s real estate industry.

The merger will give TRI Pointe Homes ownership of Weyerhaueser’s five brands: Quadrant Homes, Winchester Homes, Pardee Homes, Trendmaker Homes and Maracay Homes. Weyehaeuser’s shareholders would account for approximately 80.5 percent of ownership in the newly merged real estate company. The merger is predicted to be finalized by the third quarter of 2013.

However, in order for this business merger to be successful in California, all of the legal terms of the transaction must be properly detailed in necessary legal contracts between the parties involved. The contracts should be carefully drafted in order to minimize any misunderstandings that may lead to future lawsuits. Knowledge of applicable laws regarding contracts and business will be integral. Additionally, it is important to file the correct paperwork with the proper regulatory agencies.

Source: Los Angeles Times, Home builders TRI Pointe, Weyerhaeuser Real Estate to merge, Andrew Khouri, Nov. 4, 2013

business mergers, commercial real estate business law

It Takes Time to Organize a Successful Business Merger

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Mergers & Acquisitions on Thursday, May 17, 2012.

Businesses make use of a number of strategies to expand or diversify their business. One of these strategies is a business merger, which brings two or more businesses together as one. In many cases, a business merger occurs when one business is to the point where they need to sell their business because they simply cannot afford to continue running it. However, this isn’t always the case, such as with a recent merger of two businesses in California.

Westinghouse Solar Inc., out of San Jose, and CBD Energy Inc, from out of the country, have announced a business merger as of May 9. The merger, which was approved by both companies’ board of directors, will take effect sometime within the third quarter of this year. It will take place after certain conditions regarding closing have been met and once all shareholders have approved the transaction.

A business merger is not something that occurs overnight. It took several months for these two companies to come to agreement on merger conditions. However, it can often take longer than a few months for two companies to find an agreement that is substantially beneficial for both companies. There are numerous meetings, discussions and it takes incredibly hard work to make a business merger really work.

Understandably, problems can arise with a business merger. Therefore, it is often beneficial to understand one’s rights under California law to ensure they are protected both as an individual and as a business. After months of hard work, a business merger that fails can be devastating. By taking steps to ensure success, a business merger can likely be obtained quickly, efficiently and equally beneficial for every party involved in the transaction.

Source: Market Watch, “Westinghouse Solar and CBD Energy Sign Definitive Merger Agreement,” May 9, 2012

Business Formation & Planning, Business Law, California, Mergers