The Process, Timeline, Benefit and Structure of SPACs

By Bridge Point Capital | Sep 17th, 2019

SPAC Merger Process:

There are two critical components to complete a successful SPAC merger. The first part is for the SPAC to go public, and the second part is for the SPAC to locate an operating company and merge with it. The key players in the process include the SPAC sponsor, the SPAC management team, SPAC investors, and the target company.

 

The process for a SPAC to go public is very similar to a traditional IPO process. The typical process of a SPAC going public on NASDAQ or NYSE include the following:

 

  1. The SPAC sponsor and management team engage an investment bank, legal counsel and auditors;

  2. Incorporate SPAC and sell founder shares;

  3. Prepare S-1;

  4. File S-1 and amendments responsive to SEC comments;

  5. Negotiate underwriting and ancillary agreements with investment banks;

  6. Roadshow, pricing and closing.

 

The second step for a SPAC merger is to locate an operating company, conduct the due diligence, and obtain approvals from the SPAC Board and investors to conclude the merger:

 

  1. A SPAC needs to identify a target company within 18 to 24 months (deal specified) while filing regular periodic SEC filings as a public company;

  2. The SPAC management team will conduct due diligence and negotiate the acquisition agreement with the target company;

  3. The SPAC management team potentially will arrange committed PIPE and/or debt financing to increase the funding available to close the deal;

  4. Begin preparing proxy/tender offer document;

  5. The SPAC team and the target company sign the acquisition agreement and financing commitments, and make the necessary public announcements;

  6. Conduct roadshow(s) of the target company to investors;

  7. Obtain shareholders’ approval of the transaction or return to target company search.

  8. Redeem public shares of electing holders;

  9. Transaction close;

  10. File Super 8-K;