Special Purpose Acquisition Companies (SPAC)

Special Purpose Acquisition Companies, called SPACs or blank check companies, have been around since 1993 but exploded as a viable capital markets strategy in 2019. The Weaver team has experienced the times of novelty and wide acceptance of the go public strategy. We embrace their acceptance and are ready to use our experience for the benefit of our clients.

SPACs are publicly traded and formed for the purpose of pooling investor capital through an IPO, then finding an operating business to acquire and roll into an operating public company, usually in less than 24 months. You often hear these SPAC transactions described in the following phases: SPAC Formation, Target Company Readiness and De-SPAC Activities.

Whether you are on the sponsor SPAC or the target operating company side, Weaver’s Public Company Practice group can help.

The issues facing a SPAC are usually similar to those for any company considering an IPO, but the timeline for compliance and transformation of the entity can be a challenge. Read more about the benefits and challenges of a SPAC in our Insights article about non-traditional IPOs, including SPACs.

Companies that are considering acquisition by a SPAC should start evaluating the public company accounting and financial reporting requirements to ensure they are ready. Conversely, the SPAC would be wise to assess the target entity’s public company readiness as part of due diligence.

For target companies, pursuing the opportunity to go public requires considerable evaluation, planning, compliance, effort and a company-wide willingness to change. The earlier you start down the path, the greater the odds that both the IPO and subsequent compliance efforts will be successful.

During the de-SPAC phase, the consolidated entity can often qualify as an Emerging Growth Company, or EGC, which eases the financial disclosure requirements in the registration statement (S-4) and the internal control over financial reporting (ICFR) requirements of the new public company.

At Weaver, we support SPACs at every stage in the process by leveraging our years of experience helping companies prepare for an IPO. We also work with over 2,300 alternative investment funds and have a significant private equity practice advising portfolio companies, so we understand the relevant issues facing the target companies and funds involved with SPACs.

Below are some specific assurance, advisory or tax services where we can assist:

SPAC Formation and Reporting

Financial statement audits under PCAOB standards
Comfort letters to underwriters
Assistance with the IPO process:
- Identifying SEC financial statement requirements for registration statements
- Preparing the pro forma financial information
- Reviewing and preparing the business section, management discussion and analysis (MD&A), risk factors and other disclosures within the registration statement
- Responding to SEC comments on registration statement
- Tax planning
Assistance with financial and SEC reporting:
- Preparation of financial accounting and reporting
- Preparation for SEC reporting (10K, 10Q, proxy)
- Technical accounting matters

Target Company Readiness

Sell side due diligence
Valuation services
Sarbanes-Oxley (SOX) readiness assessment
IT services and systems assessment
PCAOB compliant financial statement preparation assistance
Assessment of technical accounting issues and tax implications of transaction
CFO advisory services

De-SPAC Activities

Financial statement audits for target companies under PCAOB standards
Buy side due diligence on target company
Fair valuation of target company
Form 8-K assistance, pro forma financial statements
Technical accounting assistance with accounting acquirer analysis, business combination accounting, other merger technical accounting issues
Tax compliance services
Internal audit outsourcing:
- Preparing SOX plan
- Assessing design of internal controls
- Testing internal controls for operating effectiveness