A reverse merger or a reverse takeover happens when a relatively smaller private company takes control of a larger public company. This restructuring usually involves a public company which is just a shell and a private company which acquires the majority shares of the public company and takes control of the board. The shareholders of the smaller private company are offered to exchange their shares with those of a public company, as a result of which, allows the transfer of shares without offering an Initial Public Offering of that public company. Although these reverse takeovers are pretty common when it comes to mature markets such as those in the United States and the United Kingdom, they are not that common in India. They are so infrequent that there have been only a handful of reverse takeovers taking place in the Indian market over the last few decades. To realize how infrequent this is, in the United States, the market witnesses at least 200 reverse mergers every year. But in recent times, due to the market’s growth and increasing diversification, there has been a jump in the number of reverse takeovers.
In 2002, ICICI Personal Financial Services Limited and ICICI Capital Services Limited merged with ICICI Bank through a reverse merger, creating the second-largest bank in the country. This step was taken in light of the evolving global banking climate and as ICICI intended to become a universal bank and expand, it decided to do it by merging with its banking subsidiary. Reverse mergers can take place across borders too, when an unlisted private company attempts to get listed in a foreign stock exchange it merges with a listed public company in a particular foreign country. Chinese companies have been taking this route to expand overseas, especially the United States of America. Numerous Chinese companies have been doing this in recent years to get listed in the US stock exchange and gain access to the US capital market and go on to make strategic investments. The Indian market has also witnessed a few of such cross-border reverse takeovers.

In 2016, an Indian travel company ‘Yatra Online Inc.’, declared that it is going to merge with a US-based company known as ‘Terrapin’. Terrapin is a special purpose acquisition company which was established with this purpose. Under the acquisition, it was decided that Terrapin’s Class A Common Stock will be exchanged for Yatra’s ordinary shares on a one for one basis. Additionally, all warrants for shares of Class A Common Stock would be automatically exchanged for warrants for the purchase of Yatra’s ordinary shares. This deal was structured as a reverse merger. Before this merger took place, Yatra was an unlisted company in the United States and due to this takeover, it became eligible to list its shares in the US stock exchange as Terrapin was a public listed company. This happened because after such a merger takes place, the public company retains its status as a publicly listed company. As a result of which, Yatra became eligible to list its shares on NASDAQ without having to go through the tiresome and expensive process of an Initial Public Offering.