KPMG SPAC Intel Hub

A knowledge center for investors and potential sellers addressing the complexities of SPAC mergers

SPACs: A hot topic for investors, acquirers and sellers

Special Purpose Acquisition Companies (SPACs) are mainstream vehicles for raising capital alongside initial public offerings. These “blank check” entities—which exist solely to acquire other companies—provide another option for sellers, as well as an efficient way for private companies to tap public equity markets.

SPAC mergers aren’t simple, however, and understanding extensive regulatory requirements can be daunting. The many complex challenges include vetting potential SPAC suitors, researching tax structuring, public company readiness, sophisticated business forecasting, and implementing systems upgrades.

This complexity is why KPMG LLP has created the SPAC Intel Hub, leveraging data-driven, AI-enabled insights to help navigate these complexities and drive faster outcomes for investors and potential sellers. Through the innovative power of AI, KPMG can deliver valuable insights in real time that can help you navigate the SPAC landscape with greater clarity and make informed decisions.

Whether you’re a privately held firm that wants to consider a merger with a SPAC or an investor in a SPAC, the KPMG SPAC Intel Hub is a valuable resource.

Insights from the KPMG SPAC Intel Hub

Here, we provide a single portal to our constantly updated SPAC knowledge. You will find concise answers to the questions that we get asked most frequently—and ones we think you should be asking.

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Key Pre-deal activities

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01

Explore liquidity options

A private company can go public via an initial public offering, a direct listing or a SPAC merger. It should weigh the pros and cons of each option before making a choice.
02

Perform due diligence on SPACs

A private company considering a merger with a SPAC should thoroughly probe the potential partner’s reputation, experience, ability to raise additional funds, etc.
03

Negotiate contingent considerations

During the examination of a SPAC partner, consider its willingness to accept lower equity in the combined company and less dilutive warrant coverage in exchange for a lower upfront payment and future payments upon achievement of specific targets. Also discuss the SPAC’s willingness to compensate the target company’s expenses if SPAC shareholders fail to approve the merger.
04

Elect tax structure

Choose an optimal legal entity structure from a tax perspective. This will largely depend on whether the target of a SPAC is a standalone C corporation or a partnership.
05

Finance debt

A SPAC may arrange debt financing to acquire a target much larger than funds raised from its IPO or to cover for the gap in capital when original SPAC investors redeem their shares.
06

Finance PIPE

A SPAC may also arrange private investment in public equity, or PIPE, from institutional investors to acquire a target much larger than funds raised from its IPO or to cover for the gap in capital when original SPAC investors redeem their shares.
07

Prepare marketing roadshow

Typically, it is the responsibility of a SPAC to undertake roadshows to market the deal and find debt and PIPE financing, but a target company can also participate.
08

Compile Proxy / S4

The proxy and/or a registration statement, such as Form S-4, is filed with the SEC when the merger is announced and must contain key disclosures, such as the target company’s historical audited financial statements and MD&A, and the combined company’s pro forma financial information.
09

Assess public company readiness

Identify gaps in the target’s current ability to go public and operate as a public company and develop a readiness plan to address them. Gaps typically include tax structure and reporting, accounting records to report, SEC reporting, systems and processes, internal controls, investor relations, human resources and executive compensation.

Key pre-close activities

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01

Complete Proxy / S4 and address SEC comments

The SEC will review the proxy and registration statement before the shareholders’ vote to approve the SPAC’s acquisition. The initial round typically takes 20-30 days, and it may take 2-3 rounds to clear SEC comments.
02

Compile Super 8-K

The financial information required includes the combined company’s pro forma statements and the target’s historical financial statements. The pro forma financial statements should reflect the actual fund flow of the merger, and the periods presented may need to be updated based on SEC reporting timeline.
03

Execute public company readiness plan

Implement the public company readiness plan to address gaps identified in the readiness assessment. Tasks may include optimizing tax structure, establishing an audit committee as well as SEC reporting and investor relation teams, upgrading IT systems, streamlining processes and shortening the month-end close timeline, and documenting and implementing controls.

Key post-close activities

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01

File Super 8-K

After the consummation of the merger, the combined company must file a Form 8-K within four business days.
02

Implement ongoing public company operations

File SEC-required documents, such as Forms 10-K, 10-Q and 8-K, on a timely basis. Provide quarterly CEO & CFO certifications for SOX requirements. Conduct quarterly earnings calls and Q&A sessions with investors and analysts.
03

Explore strategies for growth

Maximize shareholder value with plans for performance improvement, short- and long-term strategy development, and portfolio assessments to identify potential divestitures of non-core assets and/or acquisitions of value-added businesses.

Steps to ensure a successful SPAC merger

In this video, we share 7 key tips to keep in mind as well as a case study that demonstrates one of the most common pitfalls.

Shari Mager

Partner, U.S. National Leader, Capital Markets Readiness, KPMG US

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Shari Mager

Partner, U.S. National Leader, Capital Markets Readiness, KPMG US

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All data has been sourced from Capital IQ, and includes SPACs listed on the US exchanges. The data presented is indicative and may not be exhaustive.

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SPACs: A hot topic for investors, acquirers and sellers

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