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The Keys to a Successful SPAC

A popular way to go public brings communication challenges

September 2020

When the investment story of 2020 is written, it will be a thick volume – a global pandemic, an uncanny rebound in stocks and aggressive interventions by the Fed. But there will also be a chapter on the return of the Special Purpose Acquisition Company (SPAC), a deal structure last seen about a decade ago that is enjoying new popularity.

More than $30 billion has been raised in SPAC offerings so far this year, with more expected in the fourth quarter. Several factors are driving the growth – an abundance of highly valued private companies, investors hungry for returns in a world of low interest rates and dissatisfaction with the traditional IPO process.

But while a SPAC offers potential benefits for private companies that want access to the public market, it also carries significant communication challenges.

Multiple communication challenges

In fact, going public through a SPAC combines features of an IPO, an M&A transaction and a proxy contest. Doing any one usually involves intensive communication, let alone three.

Once a SPAC is formed and sells shares to the public in an IPO, it goes on the hunt for a private company to acquire. After it finds a target and negotiates the terms, it must get shareholder approval to complete the deal. In each step of the process, communication plays a vital role.

This can be a daunting process for a private company accustomed to dealing with just a few investors in quiet boardrooms outside of the public eye. For companies considering a SPAC, communication should be a part of the planning from the outset. To use an election analogy (it is that time of year after all), CEOs will need to hit the campaign trail, shake a lot of (virtual) hands and get out the vote on election day.

Key issues to consider

In our experience working with clients on SPACs, we’ve found several important areas should be addressed early on. Private companies that are considering going public under this structure should consider:

SPACs can be an attractive route for going public, and effective communication can help companies make the transition successfully. Starting early in the process is the best advice.

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