SPACs

 

Special Purpose Acquisition Corporations ("SPACs") are investment vehicles that allow public investors to invest in areas sought by private equity firms. SPACs are shell or blank-check companies that have no operations but that go public with the intention of merging with or acquiring a company with the proceeds of an initial public offering ("IPO").

The SPAC is usually led by an experienced management team composed of three or more members with prior M&A and/or operating experience. Management teams typically have developed a network of relationships in the investment community and have demonstrated an ability to create value for their shareholders.

SPAC public offerings have sprung up in a myriad of industries such as technology, healthcare, logistics, media, retail, telecommunications, the public sector, mainly looking to consummate deals in homeland security and government contracting markets, consumer goods, energy, energy & construction, financial services, services, media, sports & entertainment and in high growth emerging markets such as China and India.

SPACs are more transparent than private equity as they are registered offerings regulated by certain SEC rules, including filing their financial statements and full disclosure of any material events affecting the company. Since SPACs are publicly traded, they provide liquidity to an investor (i.e. investment comes in the form of common shares and warrants which can be traded). Further, the unit structure, the ability to decouple the units and trade separately the common shares and the warrants, allows investors to correspondingly increase or decrease their risk return profiles. The unique benefits are the special rights of shareholders to vote in approval or rejection of the deal and the ability for investors to regain most of their funds if the SPAC fails to generate an acquisition within a 24-36 month period or should they vote against the deal and convert their shares for cash.

 

We are knowledgeable about the accounting and reporting issues faced by SPACs. These issues include deferred offering costs, deferred acquisition costs and common stock subject to redemption. We also have significant experience with development stage companies and reverse mergers.