The Motive And Risk Analysis Of Overseas Reverse Merger

Overseas reverse merger is a special way of transnational merger, acquisition and reorganization. Originated in the United States capital markets, Overseas reverse merger has played a decisive role in the history of enterprise’s development in the United States and other developed countries. In recent years, because of the limitation of the capital market in China, the maturity of the overseas capital markets, and the superiority of the reverse merger itself, overseas reverse merger has become a feasible way for our country enterprise to finance, develop, and take a good part in the international economic activities.Using the Merger & Acquisition Theory and Enterprise Risk Management Theory, this paper deeply analyses the motives and the risk prevention of the case of Brightoil & First Sigh International, trying to give some ideas to those enterprises which want to start its overseas reverse merger activities. In this research, we found that, Brightoil’s urgent financing demand caused by its offshore oil supply business and First Sigh International’s business transformation is the main reason why this overseas reverse merger case happened. And at the same time we found that, Brightoil’s merger risk prevention, especially market risk, liquidity risk and legal risk prevention is rather successful, and we also point out its deficiency. In the end, Using the Merger& Acquisition Theory and Enterprise Risk Management Theory, we make the following recommendations for enterprises’ overseas reverse merger activities:To improve the success rate of the overseas reverse merger, enterprises must explicitly sure its reverse merger motives, reducing the blindness of merger and acquisition activity, at the same time, must pay attention to the risk prevention, especially during the trade payment stage,integration stage and operation stage.