Creative Business Combination Structures Allow SPACs To Successfully Compete With Non-SPAC Bidders

Certain structural features of special-purpose acquisition companies (SPACs) that offer benefits to their public investors often put SPACs at a competitive dis-advantage when they are among multiple bidders for a target company. Recent SPAC business combination transactions demonstrate, however, that careful structuring of a transaction to meet the needs of the target's owners can overcome these structural challenges and level the playing field for SPACs in a competitive bidding process.

SPAC Structure

The hallmark feature of the SPAC structure is that the gross proceeds of the SPAC's initial public offering (IPO) are placed into a trust account for the benefit of the SPAC's public stockholders. The public stockholders have a right to receive their pro rata share of the trust account if they choose to redeem their common stock in connection with the SPAC's intial business combination transaction, or if the SPAC is unable to complete an initial business combination