A special purpose acquisition company (“SPAC”) is a non-traditional acquisition vehicle that is used to take companies public. A SPAC is alternatively referred to as a “blank check company” or a “shell company” as it has no assets, funds, or commercial operations when formed.
- SPACs are oftentimes used by industry specialists to acquire businesses in their area of specialty.
- The SPAC shell raises investment capital through an initial public offering (“IPO”) with an intent to acquire companies and merge them into their shell.
- Business owners (entrepreneurs, private equity funds, and other investors) see SPAC transactions as a preferred avenue to taking their company public without going through the cumbersome traditional IPO process themselves.
- SPACs provide new investment opportunities for large and small investors.
- SPACs are not new investment vehicles, but they do come in and out of popularity.
- According to SPACinsider, the number of SPAC IPOs in 2020 were 248, a significant increase over the recent past of 59 SPAC IPOs in 2019, 46 in 2018, 34 in 2017, and as many as 20 and as few as one (1) SPAC IPOs each year from 2009 through 2016.
US SPACs require compliance with US GAAP public company accounting standards which include valuations in support of SPAC transactions, such as:
- Valuation of simple or complex equity instruments (FASB ASC 718) including founder’s shares, preferred equity, warrants, options, etc.
- Valuation of debt instruments.
- Purchase price allocation analyses (FASB ASC 805) for S4 filings when targets have been identified and again when change of control transactions (typically mergers or acquisitions) 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 SPAC transactions.
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.