Reverse mergers are also known as reverse takeovers and reverse initial public offerings (IPOs).

Reverse mergers typically include a procedure that is less difficult, time-consuming, and expensive than a standard initial public offering. 

Initial public offerings (IPOs) involve private companies using an investment bank to underwrite and distribute shares of the soon-to-be public company.

As part of a reverse merger, the acquiring company merges with the private company’s existing shareholders, who have bought a majority stake in the public shell company. 

Investment banks and other financial organizations routinely employ shell corporations as vehicles to carry out such transactions. 

These basic shell companies can register with the SEC ahead of time, streamlining and reducing the cost of the registration process.

Even though public firms have more rules and regulations to follow, they still need to focus on expanding their operations.

A reverse merger can increase the value of a company’s stock and its liquidity.