Tip of the Week: Time and Money

Some of the issues that arise in the deal-making process relate to timing.  A desire to complete a financing prior to the reverse merger creates disclosure, valuation, and structuring challenges.  In these instances I try to encourage clients to wait and complete the transaction in the name of the public entity either at closing or shortly thereafter.

In a recent trend, however, a number of PIPE investors have been willing to provide financing to the private company prior to the actual merger, understanding the risk that the merger may never go through.  They provide more downside protection for themselves in these transactions an, sometimes, penalties for failure to complete a going public event within a certain amount of time.  As deals begin to take a little longer due to the new SEC rules, the opportunity for a private company to complete a financing while waiting for completion of the merger is a very positive development.

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