Going Public A reverse merger may be the fast way to take your business public, but is it for you?

With the IPO window only beginning to open, entrepreneurs could be forgiven for giving reverse mergers more than fleeting consideration. This "back door" to the public market- reviled in the '70s and '80s for the shady deals it spawned- private companies to become public by acquiring or merging with a public "shell" company. The shell is listed on an exchange, usually the OTC Bulletin Board, but has no assets, typically following a sale or bankruptcy. A slew of regulations from the SEC in the early '90s made reverse mergers safer, both for entrepreneurs and for investors, but many experts remain skeptical.

For business owners desperate to take their companies public, reverse mergers are in fact a cheaper, quicker alternative to an IPO. They're also more certain, says David Feldman, managing partner of law firm Feldman Weinstein LLP in New York City, who believes they no longer warrant their bad rap. "You can work on an IPO for 12 months, and then market conditions say 'We're not doing it,'" he says. Unlike a traditional IPO, a reverse merger doesn't depend on market conditions, so it happens on schedule, come bull or bear.

But on the downside, because the company isn't escorted onto the trading floor on the arm of a powerful brokerage company or investment bank, market support and analyst coverage are basically nil. "Pretty much nobody cares," concedes Feldman. "Support develops over time." The reverse merger, he adds, is not about raising tons of capital, although it does offer more liquidity for investors. Rather, it's best for those companies for which being public would be a significant asset, a strategic advantage.