Special-purpose acquisition company (SPAC) mergers are an increasingly popular method for private companies to go public. With the traditional IPO process typically lasting 12-18 months, compared to 12-18 weeks for SPAC transactions, in addition to the added SPAC benefit of securing capital through private agreements, it’s an enticing road for many businesses to expand their profitability.

If your organization is considering this strategy (you can learn more about what a SPAC is and how the process works here), you may have already been approached by a sponsor or identified how a SPAC could be beneficial to your company’s growth.

While the SPAC route can rapidly increase the value of your business, this accelerated path to going public takes careful orchestration to reap the full benefits — which can quickly get overwhelming without adequate preparation. Our checklist explains key steps you can take to make the SPAC process as efficient and cost effective as possible from day one.

Keys to Preparing Your Company for a SPAC Transaction

• Get a valuation or have a recent one that captures timely financials.

  • Confirm that a SPAC is the right path for your business. Understanding your business’s worth is an important starting point for deciding whether a SPAC (or any public offering) is the right option for your organization. If your valuation is under $200 million, it may be difficult to find a partner. You may also believe your company can get a higher valuation soon, leading to a more profitable agreement.
  • Identify an independent third-party valuation firm to perform all your valuation activities, such as warrants, purchase price allocation analyses and fairness opinions.
  • Start these processes as soon as possible to avoid delaying or missing any filing requirement deadlines.

• Establish an accounting program capable of standing up to a Public Company Accounting Oversight Board (PCAOB) review.

  • Prepare your accounting ecosystem for the increased scrutiny that public companies encounter. The SEC is looking more closely than ever at SPAC financial projections and due diligence.
  • Projections should have thorough documentation and support performed by an independent third party in preparation for review by the SPAC’s board before deal approval.
  • Break up historical financial statements into quarterly results, update financial statement disclosures and prepare audited historical financial statements that meet PCAOB standards.

• Identify your staffing needs and evaluate potential third-party vendors.

  • Determine if you have the people in place — such as tax, accounting, internal audit, financial planning and analysis (FP&A) and investor relations teams — to run your back office like a public company today.
  • If you don’t have the appropriate internal teams in place, aren’t ready to add those resources now or can’t add them in the needed timeframe, you should outsource those positions.
  • Select a vendor that can manage your SEC reporting, has relevant public company experience, and has the specific skills and tools you need to help your organization through a public transition.

• Select legal counsel or bankers to guide you through the transaction.

  • Retain an independent valuation firm to perform a fairness opinion for your transaction. A fairness opinion isn’t legally required, but it helps lessen the threat of potential litigation while protecting the board, management and shareholders.
  • Legal counsel can help draft disclosures and help explain complexities to your deal’s structure.
  • Bankers can help you better understand your valuation, so you can assess the fairness of your offer and whether the deal is the right decision for your company at this time.

• Pick an auditor.

  • Find an independent auditor quickly. Often, companies don’t prioritize choosing an auditor, but it can be difficult to find a firm that’ll commit to completing your audit by the date you need it. Or they can commit to that timeframe but can’t get you onto their calendar until the following year.

• Develop an internal controls program.

  • Make sure your board of directors’ activities are compliant with Sarbanes-Oxley (SOX) requirements.
  • If they’re not, develop an internal controls strategy that is SOX compliant.

• Put a plan in place to address areas for improvement before problems arise.

  • Designate the people and processes to remediate issues as they occur to help keep your transaction from deviating from the agreed upon timeline.

For questions or to learn more about preparing your company to go public, contact our SPAC experts.