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Efforts to conclude a prospective business combination

In short

It is the main task of every SPAC management team to conclude a prospective business combination within a given, short timeframe.
At the end of this acquisition phase, the proposed business combination has to be approved by the shareholders of the corporation.

Preparing the Acquisition

A SPAC should look to acquire a company or companies with combined enterprise value three to four times the cash raised in the SPAC’s IPO.

This strategy increases the chances of market support for the acquisition, and hence share price stability above the $10 per share IPO.

Acquisition Process Summary

Finding the suitable target company

Accomplishing a Convincing Transaction

Although S.E.C allows to close an acquisition within 36 months, the market customs will require an transaction at latest within 18 to 24 months.

In general, the markets – and thus also the shareholders of SPAC – will appreciate an acquisition of enterprise values that generates more than 200% of the IPO proceeds; the target of a SPAC management should be 3x or more. While the S.E.C. regulations only require that 80% of the IPO proceeds are yielded in enterprise value, it is unlikely that this return would be welcomed by the institutional investors and most probably they will redeem their shares.

As the planned acquisition is described in the securities prospectus (Form S-1) only very general and generically, as a contingency the managment of the corporation could also suggest a different target to prevent a failure of the SPAC and avoid its liquidation.

Preparing the Acquisition

Managment’s major task

Target Search & Acquisition Phase

During the Acquisition Phase the managment team has do identify a target company, conduct dillegence on it and negotiate the acquisition agreement. Celtic Asset & Equity Partners works with the managment team on this. Further, we will maintain investor relations and liaise between the SPAC, securities counsel and investment bank(s).

  • Identify target business

  • Conduct diligence

  • Negotiate acquisition agreement

  • Potentially arrange committed PIPE and/or debt financing

  • Begin preparing proxy/tender offer document

  • Sign acquisition agreement and financing commitments

Approval & Closing Phase

In this phase the SPAC announces the proposed business combination and presents it to the shareholders to get an approval for the transaction. It is our task within this stage to provide the public and shareholders with background information about the transaction and the industry.

Shareholder Approval

After entering into an agreement for a business combination, the SPAC must offer each public shareholder the right to redeem their shares in conjunction with the transaction, and must prepare and circulate to its shareholders a document containing information concerning the transaction and the target company, including audited historical financial statements and pro forma financial information. This document typically is in the form of a proxy statement for a shareholder vote, which also is filed with the SEC and is subject to SEC review.

If a shareholder vote is held, the voting standard is typically a majority of the shares voted as set out in the SPAC’s organizational documents. The management team typically agrees at the IPO to vote its founder shares and any public shares acquired by it during or after the IPO in favor of the proposed business combination.

Shareholder Redemptions

A SPAC also may conduct redemptions pursuant to the SEC’s tender offer rules, in which case the SPAC would file tender offer documents with the SEC instead of a proxy statement.

The funds from the trust account are primarily used to complete the business combination and to pay for the redemption of shares from any shareholders that have elected to redeem their shares.

Any public shareholders can redeem their shares of common stock for a pro rata portion of the trust account at the time of the closing of the business combination, whether they vote for or against the business combination. Often, the agreement relating to the business combination contains a condition requiring a specified amount of cash to remain after the SPAC satisfies all redemption requests.