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SPACs (Special Purpose Acquisition Companies)
SJKP LLP draws on its premier expertise in capital markets, M&A, private equity, public company representation, and tax law to provide clients with comprehensive support throughout the entire SPAC life cycle.
Our team navigates the complexities of Special Purpose Acquisition Companies (SPACs), offering strategic advice on everything from formation and initial public offerings (IPOs) to business combinations and post-transaction activities. We guide our clients through the full spectrum of legal, regulatory, and financial considerations, ensuring smooth execution at each stage of the SPAC process.
SPACs have emerged as a significant force in global capital markets, reshaping how private companies access public markets. At SJKP LLP, we provide nuanced and commercially driven advice to sponsors, investors, and target companies alike, helping them capitalize on opportunities while navigating regulatory scrutiny and evolving market sentiment.
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1. SPACs: Understanding the Structure and Strategy
Special Purpose Acquisition Companies (SPACs) are rapidly becoming a popular alternative to traditional IPOs. These companies are formed by investors and sponsors focused on a specific industry, with the goal of raising funds through an IPO before acquiring an operating company. Unlike traditional IPOs, a SPAC management team targets a specific industry or sector, but not a particular company, before going public.
After the IPO, the SPAC typically has a set timeframe—usually between 18 to 24 months—to acquire a target company (referred to as a “de-SPAC”) or return the funds to investors. This structured timeline introduces both discipline and pressure into the transaction process, requiring meticulous planning and execution.
A Balanced Structure for Investors and Sponsors
The SPAC structure carefully balances investor protections with an effective acquisition tool. Funds raised in the IPO are placed in a trust account, ensuring that capital is preserved until a viable acquisition is identified. Investors typically have the right to redeem their shares if they do not support the proposed acquisition, protecting downside risk.
At the same time, sponsors gain access to significant pools of capital and the ability to execute transformative acquisitions in their chosen industries. This dual benefit makes SPACs an attractive vehicle for investors seeking both liquidity protection and upside exposure, while sponsors gain a unique platform to create long-term value.
2. SPACs as an Alternative Route to Going Public
SPACs provide an alternative pathway for companies looking to go public. This route offers financing and a faster, more efficient process compared to traditional IPOs. One of the primary advantages of a SPAC IPO is that the pricing is typically simpler, as the value of a SPAC’s shares is determined by the funds held in its trust.
Unlike traditional IPOs, where pricing can fluctuate based on market volatility, SPAC transactions rely on negotiated valuations during the de-SPAC phase. This allows private companies to negotiate directly with sponsors and investors, often resulting in a more predictable valuation process.
The SPAC IPO Process
SPAC IPOs are often priced based on the trust funds they hold, and the price discovery process happens during the de-SPAC transaction. This mechanism can be more insightful and efficient than the pricing process in a traditional IPO.
Leading sponsors with significant assets under management are increasingly executing large SPAC IPOs and de-SPAC transactions, successfully acquiring substantial operating businesses in the process. SJKP LLP advises at every stage of this journey, from drafting IPO registration statements and negotiating with underwriters to structuring business combinations that maximize value for all stakeholders.
3. SPACs: Seamless Legal Capabilities by SJKP LLP
While SPACs present unique opportunities, they also come with heightened scrutiny from regulators, investors, and the public. The surge in SPAC activity in recent years has prompted increased oversight by the U.S. Securities and Exchange Commission (SEC), particularly regarding disclosure obligations, accounting standards, and potential conflicts of interest.
Our SPAC team helps clients anticipate these challenges early, ensuring robust disclosure practices, transparent deal terms, and compliance with evolving regulatory requirements. We also provide strategic guidance on managing litigation risks, such as shareholder suits challenging de-SPAC valuations or sponsor compensation.
Full-Service SPAC Support
SPAC activity is no longer confined to the United States. European and Asian markets are exploring SPAC structures, often with distinct regulatory regimes. Our global platform enables us to advise clients on cross-border SPAC transactions, addressing jurisdictional complexities such as listing requirements, tax treatment, and merger control reviews.
By combining U.S. securities law expertise with global market insight, SJKP LLP helps clients navigate the international expansion of SPAC activity, ensuring compliance while capitalizing on global opportunities.
4. SPACs: Seamless Legal Capabilities by SJKP LLP
SJKP LLP is well-positioned to guide clients through the full life cycle of a SPAC transaction, from formation to IPO, business combination, and ultimately life as a public company. Our SPAC team provides seamlessly coordinated, full-service advice, drawing on our deep expertise in capital markets, M&A, private equity, and tax law.
We understand that SPAC transactions demand a multidisciplinary approach. By integrating our expertise across multiple practices, we ensure that every legal and commercial consideration is fully addressed.
Full-Service SPAC Support
Our team brings together a wealth of experience in SPAC transactions, combining industry-specific knowledge and cross-disciplinary legal expertise to deliver unmatched counsel. Whether advising SPACs, their sponsors, underwriters, or M&A participants, we provide commercially focused solutions that align with our clients’ strategic goals.
From structuring innovative financing arrangements to managing post-closing governance and reporting obligations, we ensure that clients are equipped to succeed not only in executing the transaction but also in thriving as public companies.
The information provided in this article is for general informational purposes only and does not constitute legal advice. Reading or relying on the contents of this article does not create an attorney-client relationship with our firm. For advice regarding your specific situation, please consult a qualified attorney licensed in your jurisdiction.
