Post-merger SPAC considerations for CFOs

The SPAC merger surge

Although SPACs have been used for decades as alternative investment vehicles, they have recently come into vogue as seasoned investors and management teams have turned to SPACs to mitigate the increased market volatility risk of traditional IPOs. 2020 was a record-breaking year for SPAC IPOs. This surge has been driven by the influx of high-profile investors and management teams entering the SPAC space, coupled with an abundance of uninvested capital that had largely been sat out the first half of 2020.

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Addressing risks through SPAC readiness

SPAC transactions come with their own set of unique challenges, and it is essential for entities to have (1) an understanding of the risks associated with these investment vehicles and (2) a comprehensive project management plan to meet the demands of an accelerated merger timeline.

Recent market volatility, combined with the arrival of seasoned sponsors and management teams, has created a modern-day SPAC revolution. The abundance of funds held in trusts and the increased appetite for private investment in public equity (PIPE) transactions have thrust SPACs beyond the fringe of capital markets and into the mainstream as significant players for potential sponsors, investors, and target operating companies.

In this publication, we’ll explore:

• The background: A brief look into the past and present of SPACs, including recent years’ record-breaking pace.
• The rise in SPAC use: An examination of the conditions and trends that drove the momentum of SPACs in 2020.
• The life cycle of a SPAC: An overview of the life cycle of a SPAC, from inception through the consummation of a merger.
• The demands of ongoing operations: A survey of the core competencies that must be examined and elevated after a target company is acquired.