While the pandemic and the presidential election stole the headlines last year, 2020 will be notable in the history books for another reason: It was the year that SPACs (special purpose acquisition companies) went mainstream.
Although they have operated under the radar until recently, SPACs have actually been around for decades. UHY LLP has had a strong concentration in SPAC support services for many years, and its advisors have expertise in guiding clients through all the stages of a SPAC transaction.
SPACs are essentially a shell entity, which is generally formed by investors with expertise in a particular industry, with the intention of pursuing acquisitions. To owners of a smaller company, selling to a SPAC can be an attractive option, since this type of transaction typically increases the sale price, sometimes as much as 20 percent, versus a typical private equity deal. Additionally, SPACs have emerged as a popular way to take a private company public while circumventing the traditional IPO process. In 2020, Virgin Galactic, DraftKings and Opendoor were among the companies that went public by merging with a SPAC.
In the current transactional environment, SPACs have risen to prominence as an alternative to private companies seeking an exit or sale versus a traditional private equity buyout. For the private equity landscape of late, SPACs have proven to be either direct competition or an opportunity for private equity (PE) investors. Many leading private equity firms such as TPG Capital, Apollo Global Management and CC Capital Management have entered the SPAC arena by raising billions of dollars sponsoring SPACs.
The SPAC phenomenon provides an opportunity for private equity firms to achieve a liquidity event in a much quicker fashion than the traditional PE model – raising a fund and waiting a period of several more years to deploy the capital and eventually achieve a liquidity event. However, this does not come without challenges, as SPACs have unique administrative and regulatory requirements. Therefore, if you are a private business owner seeking a SPAC transaction, you must consider the special accounting and financial reporting requirements. For private companies, that means providing information that is similar to what they would need to provide in an IPO, but on an accelerated timeline that is not required in a traditional PE backed buyout. A typical PE deal is driven on value creation during the hold period; with SPACs, the focus is different: target selection, the acquisition process and the right leadership team are paramount. Therefore, if you are a privately held company that is considering a sale or a related exit transaction, it is important to reach out to experienced professionals like those at UHY LLP to help you navigate the process and unique considerations that you will face with a sale to a SPAC or PE buyer.
Because of their deep concentration in the SPAC space, the professionals at UHY have the expertise to seamlessly guide senior leaders through the complex transaction process, from developing the initial strategy all the way through post-merger integration. The team assists companies in realizing the return on investment that they planned in their transactions.
This includes vision and strategy: quantifying strategic assessments and providing an objective basis to formulate key decisions. UHY helps clients define growth initiatives and plan for long-term corporate sustainability.
The team at UHY provides additional insights into the sustainability of a business through non-financial due diligence, including commercial, operational, IT and HR. UHY also helps clients improve operational efficiencies or increase capacity to support growth pre- and post-merger, providing for increasing margins to support future investments. UHY helps clients define a shared services model for finance, IT, legal, HR and other areas to lower transactional cost and increase capacity.
In today’s world, a company’s technological capabilities are vital to the success of any transaction. UHY conducts unbiased assessments of current technology to determine the organization’s readiness for change. This includes selecting and implementing software, such as enterprise resource planning (ERP) or material requirements planning (MRP) software. UHY also focuses on the finance transformation, optimizing processes and improving partnership alignment to support current and future business activities, and leveraging technologies for increased visibility and effective planning.
Following the deal, UHY provides crucial guidance with bringing organizations and cultures together, optimizing business processes and integrating operations. The team helps clients prioritize and provide progress against key metrics.
UHY provides a full range of accounting and advisory services through all the stages of the SPAC lifecyle to both the SPAC sponsors and the target companies. These include assessing the scaling up of people, process and technology needed for the transaction; providing bookkeeping services throughout the entire transaction including entering transactions, making journal entries, performing account reconciliations and monthly close procedures; preparing financial statements and related footnote disclosures, including compliance with changing SEC guidance; providing audit support services, among other services. Post-IPO, the firm manages SEC filing requirements, including Form 10-Qs and Form 10-Ks.
UHY also provides a wide range of valuation services in connection with SPAC transactions.