Traditional Underwriting Versus an Acquisition or Merger
with a Public Company

The company usually must have a 3-year track record or more of demonstrated growth.

The company usually needs a detailed business plan and a well documented due diligence file.

The company needs audited financials of a balance sheet for two years and for three years of income statements.

The company must find an Underwriter and negotiate an underwriting agreement.

The company must retain issuer’s counsel to prepare registration statement (prospectus) and all required exhibits.

The company must continually interact with issuer’s attorney’s, underwriters, the underwriter’s attorneys, printers, SEC regulators, NASD regulators, and state and "blue sky" regulators.

The company must prepare marketing material and conduct road show presentations to the financial community.

Negotiate purchase of controlling interest in a public company or merger agreement.

Prepare an SEC disclosure document with the help of a securities attorney.

Prepare audit usually limited to one-year balance sheet and two years income.

The company can usually "blue sky" their stock for secondary trading in 41 states or more by publicly filing their financial statements in Standard & Poor’s or Moody’s.

The expected time frame through a merger or acquisition can be as little as 2 months up to six months and the cost ranges from $150,000 to $300,000. The dilution or amount of stock given up to the public is normally 5% to 15%. The public company that is merged with or acquired should provide a shareholder base of at least 300 shareholders, market makers, and a complete due diligence file with appropriate warranties. Going Public normally does not raise the company money, however, once public the company is in a better position to raise money through a private placement or a secondary public offering.