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Definition: A smaller quoted company acquires a larger unquoted company via share-for-share exchange. Result = unquoted company gains control + effectively becomes listed. • Examples: Eddie Stobart (2007) listed through an RTO with Westbury. US term = reverse merger. Benefits: – Faster & cheaper than IPO (can take ~30 days vs 1–2 years). – Easier access to capital + higher valuation. – Share-based incentives to attract staff. – Analyst coverage often already in place. – More resilient than IPOs in downturns. Drawbacks: – Seen as “poor man’s IPO” (reputation risk). – Past scandals (e.g., US–China RTO fraud cases). – Complex regulations: suspension risk, mandatory offer rules. – Potential shareholder “dumping” post-deal. – Indirect costs (acquisition premiums, investor relations). Exam focus: In AFM, expect to explain the structure, compare to IPOs, and discuss pros/cons in scenario context. Marks come from applying benefits/drawbacks to case detail. Takeaway: An RTO can be a quicker route to market than an IPO — but brings unique risks and regulatory challenges. Studying ACCA? Learnsignal offers mock exams, expert feedback, video lessons, and structured plans to help you pass. 👉 https://www.learnsignal.com/acca/ #ACCA #AFM #ReverseTakeover #IPO #CorporateFinance #Mergers #Learnsignal