A special purpose acquisition company (“SPAC”) is a non-traditional acquisition vehicle used to take companies public.
SPAC & SPAC Valuation Overview:
- SPACs are alternatively referred to as “blank check” or a “shell” company as it has no assets, funds, or commercial operations when formed.
- The SPAC shell raises investment capital through an initial public offering (“IPO”) with an intent to acquire a company(ies) and merge it(them) into the shell.
- Business owners (entrepreneurs, private equity funds, and other investors) see SPAC transactions as a preferred avenue to taking their company public while avoiding the cumbersome traditional IPO process themselves.
- SPACs are not new investment vehicles, but they do come in and out of popularity.
- According to SPAC Insider, there were 613 SPAC IPOs in 2021, an incredible increase over the 248 SPAC IPOs in 2020, 59 in 2019, 46 in 2018, 34 in 2017, and between 20 and one (1) SPAC IPOs each year from 2009 through 2016.
US SPACs require compliance with US GAAP public company financial reporting standards which include valuations in support of de-SPAC transactions, such as:
- Valuation of simple or complex equity and debt instruments (FASB ASC 320, 718, 815 and 946) including founder’s shares, preferred equity, warrants, options, etc.
- Purchase price allocation analyses (FASB ASC 805) for S4 filings when targets have been identified and again when change of control (de-SPAC) transactions are consummated and an opening day balance sheet is required.
- Other analyses as necessary to comply with FASB accounting requirements.
There may also be a need for Fairness Opinions and Solvency Opinions for some de-SPAC transactions. For more information, download a copy of the recent article by Ralph Consola: Transparency, Independence, Fairness Opinions and the SEC.
Marshall & Stevens provides all of the above listed valuation consulting services and complies with the Mandatory Performance Framework (“MPF”) for those Certified in Entity and Intangible Valuations (“CEIV”), a professional designation designed to improve the quality of public company valuation analyses and reports.
For more information, please contact one of the professionals listed below or check out this example of a SPAC valuation in this SPAC Success Story: eCombustible Energy LLC by clicking here or the image below: