There are certain steps that must be taken when a company is anticipating purchasing an OTCBB shell for the purposes of going public. For purposes of this discussion we will assume the “Company” has performed its due diligence and is aware of the pros and cons of going public through a reverse shell merger. However, if you are uninformed I suggest you read previous postings on this Blog site.

The first area to address is who is going to represent you. Two people are key in the transaction of purchasing a shell. Namely, an SEC attorney and a business consultant.

SEC Attorney

There are many SEC attorneys to choose from, but make sure that yours has experience and expertise in the areas of reverse shell mergers. A good SEC attorney will provide you with guidance and perform the necessary due diligence on the proposed shell that you are contemplating buying. The attorney will have to retrace the history of the shell through its SEC filings and take a close look at the trading history of the stock. He will also have to investigate the backgrounds of the principal selling shareholders and the liabilities of the company, including outstanding debts, loans and lawsuits, etc.

Business Consultant

It is also just as important to have a business consultant that is very experienced and familiar with the reverse shell merger marketplace. You want someone who knows how to source you a shell directly from the principal(s) of the shell (the “Sellers”). Too many times I have witnessed a Buyer purchasing a shell through what ends up being a daisy chain of “finders”. In the end the Buyer pays a substantially higher price for the shell, usually $200K to $300K more than he should have. It is imperative that you are resented by someone who has access directly to both Buyers and Sellers. Our company Ventana Capital Partners is such a company. In most cases we can find a shell for a Buyer and have them buy the shares directly from the Sellers. You can go to www.ventanacapitalpartners.com to get further information.

A good consultant will also perform a certain amount of due diligence prior to showing you a shell to make sure representations made by the Seller are true and accurate. The shell must also meet the requirements of the Buyer in question. I have seen too many deals where no one has reviewed the accuracy of the information provided by the Seller or gauged the Sellers ability to provide the necessary documentation to close on the transaction. If you retain the right business consultant he will be able to deliver a properly documented package to your attorney. This will save your attorney time and you money.

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