SPAC Mergers and Acquisitions: Structuring and Deal Terms, SEC Scrutiny

Pricing and Consideration, Recourse, Earnouts, Closing Conditions, Allocation of Board Seats

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Thursday, August 5, 2021

Recorded event now available

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Course Materials

This CLE course will examine the features of de-SPAC merger transactions. The panel will discuss deal terms typically negotiated between the SPAC and the target and how they vary from conventional deals. The panel will also analyze the de-SPAC process of taking the target public, including the offering timeline, pricing, and allocation of shares.

Description

De-SPAC transactions are usually structured as mergers of the target company with the SPAC, but SPAC deal terms vary significantly from standard M&A deals. The capital structure of the merged entity will depend on how many SPAC shareholders elect to participate or redeem their shares. Since a SPAC will take a private company public through a merger, the private operating company will need to comply with securities law disclosure requirements. Deal counsel must address all of these issues in the de-SPAC merger process.

Among the key terms negotiated in the merger agreement are the valuation of the target company (and any earn-out or price adjustments), the form of consideration (stock, cash, or a combination), recourse to the target company, “fiduciary outs” and termination fees, and other terms. SPAC M&A terms continue to evolve, so counsel will need an awareness of what is "market."

As a condition to closing, a target company may require the SPAC to have a minimum amount of cash available after any redemption of the SPAC's shareholders at closing. SPACs can raise capital through PIPEs to ensure there is cash available. Target companies will want to include provisions in the merger agreement that ensure sufficient committed PIPE financing available.

While there are certain advantages to pursuing a de-SPAC transaction as opposed to an IPO, the SEC has recently indicated it intends to review target company disclosures to the same extent as those provided in an IPO. The SEC will carefully review the disclosures by SPACs and target companies in the proxy or registration statement, including the projections and valuations contained in these filings.

Listen as our authoritative panel discusses these and other issues counsel must consider in negotiating and closing a de-SPAC merger.

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Outline

  1. The de-SPAC merger: typical structure
  2. How de-SPAC merger terms vary from standard M&A transactions
  3. Options for existing SPAC shareholders: warrants, redemption
  4. Need for cash after closing: PIPEs
  5. Securities disclosure issues with taking the target public and increased SEC scrutiny

Benefits

The panel will review these and other concerns:

  • What issues should be considered upfront before a SPAC proceeds to make an offer on a target company?
  • What is the result of de-SPAC transactions for securities law purposes, and how does that affect the process?
  • How do de-SPAC merger deal terms vary from most M&A transactions?
  • How can PIPE financing facilitate closing?

Faculty

Allen, Natasha
Natasha Allen

Partner
Foley & Lardner

Ms. Allen is a strategic advisor for her clients, supporting leadership teams in complex decision making. Prior to...  |  Read More

Diamond, Brandee
Brandee L. Diamond

Partner
Foley & Lardner

Ms. Diamond provides legal advice to investors, corporate boards, and public and private companies in a range of...  |  Read More

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