A may issue its shares to acquire the shares of B. However, because of the greater number of A shares given to the former B shareholders relative to those held by the shareholders in A before the combination, the former shareholders in B may have the majority of shares in A and be able to determine the operating and financial policies of the combined entities. This is known as a:
A)Reverse acquisition.
B)Goodwill gesture.
C)Hostile takeover.
D)Contingent consideration.

Question

Quizplus · Accepted Answer

A reverse acquisition refers to a situation where a company (in this case, company A) acquires the shares of another company (company B), but because of the terms of the deal, the former shareholders of company B end up with a majority of shares in company A. This means that the former shareholders of company B can essentially take control of company A and determine its policies and strategies. This is also known as a reverse merger. The other options (B, C, D) do not accurately describe this scenario.

A May Issue Its Shares to Acquire the Shares of B