Case Study On Reverse Takeover Of HLA

Reverse takeover (RTO) is resulted from the environment where there is contradiction between strict IPO approval and lots of qualified company which plans listing into the capital market. IPO plan implementation requires not only sustained profitability but also complicated and endless approval. If company waits to deadline, it must be a year or two after. In details, the whole process includes unforeseen circumstances with very high time cost. In contrast, reverse takeover approving is easier to reach and less expensive. Thus, reverse takeover has almost been becoming the best choice for unlisted companies which seek financing. With development of economy, reverse takeover has become an important way to promote resource allocation in capital market. In recent years, there have been many reverse takeover companies, financing in capital markets, such as Guo Jin securities RTO, Zhong Nan Real Estate RTO and Dalian Jinniu RTO cases. However, it also has several questions from the reverse takeover. It is worthy of in-depth discussion and research for accounting operation, motivation and performance analysis.Based on the case study on reverse takeover of Heilan Home (HLA), this essay discussed feasibility, market response and rationality of M&A of HLA which is a clothing company under decreasing clothing industry. Firstly, this essay has briefly presented the basic situation of both parties-Heilan Home and Canal Scientific and Technological Co. Ltd (CSTC). The whole operation process of the case is divided into three parts which are CSTC acquiring HLA by direct add-issuance, Heilan Group transferred CSTC’s shares and CSTC renaming as HLA. After that, it analyzed the feasibility rationality and market response. Finally, this essay has discussed the position of shell company, selection of the asset operation and acquisition form, in order to break through domestic and inherent securities industry features in terms of reverse takeover. As the result, the essay abstracted universal and meaningful recommendation of private enterprises RTOs.