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A special purpose acquisition company (SPAC) is a pooled investment vehicle that allows public stock market investors to vest in private equity-type transactions, remarkably leveraged buyouts. SPAC is a blank-check company that doesn’t have any operations but goes public to merge with or acquire a company with the SPACs initial public offering proceeds.
SPACs have gone through various structural evolutions to provide SPAC operators with the best possible opportunity to attain a successful business combination. These efforts have been eminently successful and can be credited with the massive resurgence, utilization and success we witness today. It helps target company management teams appreciate the complexities and time pressure involved in completing a SPAC transaction.
Are SPACs new?
The first set downlisting a blank-check company was dated back to 1993, as Bloomberg reported. SPACs used to be considered a last resort if a company couldn’t go public via a regular IPO or attract takeover interest from financial or strategic investors, SPACs gave an alternative.
Revival of SPAC’s
The sponsors creating SPACs, the approach offers a faster turnaround for their money than traditional private equity funds, which often work on a 10-year timeframe. As a more high profile, seasoned investors moved into the sector, the sight of billionaires build SPAC money gave the format some presence that attracts others.
Why SPAC’s are hot?
The pandemic has built volatility levels, making IPOs riskier and bringing the market to something of a crawl. At the same time, U.S. Federal Reserve had pumped extra cash into the market. SPACs offered the chances of better returns that came with some downside protection. The new awareness came as venture capital and private equity funds that had forced money into private companies for a decade were looking for an exit, preferably not an IPO.
SPAC’s process
The process of SPAC’s has been classified into five categories:
- Integration
- Combined entity optimization
- Support & servicing
- IPO Phase
- Roadshow
- S-1 Filing
- IPO
- Operational Phase
- Target insurance due diligence
- Limit benchmarking
- Business Combination Readiness
- Transactional risk insurance products
- Business Combination Support
- Change-in-Control
- Run-off policies
SPAC outlines our strategic approach toward addressing and optimizing these unique and highly specialized insurance and risk management needs. Implementing a comprehensive and strategic plan will ultimately elevate the engagement with business combination targets by creating higher trust and attraction levels while providing the robust protection necessary for the SPAC stakeholders. While launching a SPAC, the management team and their trusted advisors should seek a risk management partnership that will provide value throughout the entire life cycle.
SPAC’s to the future
SPAC’s are evolving, as is the market around them. It offers a faster, cheaper way of taking a company public. For instance, IPOs get a little more efficient due to SPACs growing prominence, through traditional IPO s aren’t going away. SPAC’s have emerged as an attractive alternative strategy for investors and business owners.
As the risks of the digital landscape of the future begin to emerge, it is essential, now more than ever, that risk management partners become an invaluable member of the deal team, providing the advice and tools necessary to aid in the achievement of success. Since the most recent financial crisis, where the SPAC has seen an explosion of growth and success, the age of digitization has ushered in emerging cyber-related risks and significant threats that demand the attention of SPAC operators and the entire professional M&A ecosystem.
MAS is registered with PCAOB, USA and assist its clients with SEC filings including S-1, F-1 Regulation-A, Regulation-CF, and10 Ks, preparation of US GAAP financial statements, drafting the SEC filings ensuring they comply with all statutory requirements in a timely manner. If you have any questions or wish to know more about the SPACs life cycle, kindly contact us.
