Final answer:
A reverse takeover transaction refers to a private company acquiring a public company, allowing the private company to have access to the securities markets without the complexity of an IPO. Public companies are owned by numerous shareholders who vote for executives, whereas private companies are usually smaller and owned by individuals or partners. D) A nonprofit organization.
Step-by-step explanation:
In the context of financial transactions, a "reverse takeover" is an intriguing event where a public company is acquired by a private entity. To answer the student's question, in a reverse takeover transaction, a public company is acquired by: A) A private company. This is because during a reverse takeover, the private company typically seeks the advantages of being a public entity without having to go through the complex and demanding process of an initial public offering (IPO).
Public companies are organizations that have decided to sell stock that financial investors can buy and sell on public markets. These companies are owned by shareholders who have authority proportional to their shareholding when it comes to voting for the board of directors. The board is responsible for hiring top executives to manage the company's operations daily.
Contrastingly, a private company is frequently owned by individuals or groups who oversee its daily management. These entities can range from sole proprietorships to large corporations that haven't issued public stock. Well-known examples of large private companies include Cargill, Mars, and Bechtel-- each with extensive annual sales but without publicly traded stock.
The distinctive feature of a reverse takeover is that it enables a private company, which may be a sole proprietorship, a partnership, or a closely-held corporation, to acquire a public company thus gaining access to the securities markets without going through the more traditional route of an IPO.