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The 4 phases of a Special-Purpose Acquisition Company

Prior to the IPO, the founders of the SPAC invest a small amount of initial capital to form the SPAC and hold all of the pre-IPO equity. Here is how to get from an idea to a succesful acquisition.

SPACs have a simple model: raise funds from the public markets, then find a company to merge with.


There are special structural characteristics in a SPAC, but it offers private equity sponsors a number of serious advantages in terms of transaction objectives, structure and return on investment. The SPAC IPO market has recently experienced considerable demand and continues to prosper. All this has further encouraged private equity sponsors to take advantage of SPAC’s benefits. We will give you an insight into the different phases of a Special-Purpose Acquisition Company from the idea to a winning transaction.

If a SPAC fails to complete a business combination within the specified time frame, founder shares and private placement warrants will become worthless. This builds an immense financial pressure for a Sponsor to get a deal done.

  • The SPAC must conclude its acquisitions within 18-24 months of the IPO.
  • Up to 102% of the IPO proceeds are held in trust pending shareholder approval of the acquisitions.
  • SPACs typically reserve cash from the IPO proceeds for an acquisition phase budget to cover legal and accounting due diligence expenses.
  • SPACs typically acquire companies with enterprise values 2 to 4 times the IPO proceeds.
  • If a larger market clearing transaction can be negotiated that exceeds the SPAC’s ability to finance the acquisition, the investment bankers are prepared to raise the additional equity and debt.

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Features of a SPAC

Special Purpose Acquisition Company IPOs differ significantly from traditional equity IPOs. It is important for investors and business professionals to understand the difference:
FEATURES
SIGNIFICANCE
Third Party Escrow
100% + of cash held in trust
Target Enterprise Value must be 80% of net assets
Ensures that only targets of a minimum size are proposed
Shareholder Approval/Tender offer
Only well-received transactions get approved
Management Ownership and Concurrent Investment
Incentivizes management to find and close a deal
Escrow of Insider’s Shares
Insiders do not participate in a liquidating distribution for interests held prior to IPO
Deal Deadline
Limits the time of capital investment

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We are a network of experienced financial advisors, attorneys, auditors and other professional business consultants in 4 countries with more than 25 years of business experience and specialized on SPAC.
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Although the general IPO process of a SPAC is very standardized, the decails are important in individual cases. It is important to have specialized lawyers, a successful investment bank and experienced consultants at your side.
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We are presenting you an overview on recent and upcoming transactions.

Here is a selection of  SPAC projects where we are involved.

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