Your timeline to get ready for the SPAC process

12/3/2021
Your timeline to get ready for the SPAC process

Walk through the major steps in the SPAC process and get tips that can help make your SPAC transaction successful.

With the current state of the market, you might be approached with an offer from a special purpose acquisition company (SPAC). SPACs help companies go public, but unlike a traditional IPO, SPAC transactions have a much quicker timeline from negotiation to sale, due to the typical limited life of a SPAC entity. SPACs typically have between 18 and 24 months in which to find a target and execute the merger. That means it’s very important to understand the amount of effort required to satisfy the financial and tax reporting requirements you'll face. No matter where you are in the SPAC process, this timeline can help you understand where to go next – and when to ask for help.

It can be hard to keep up with the latest in accounting and financial reporting. Let our team of specialists help with insights into the latest news, trends, and more.

A SPAC is a company that’s created to raise enough capital to merge with or purchase another company (or companies) to take public. Before that can happen, the SPAC itself must go public. Then the SPAC looks for a company to buy (target company) and take public, typically through a reverse merger.

Explore this estimated timeline for a merger target in the SPAC process:

Months 1-5
Months 5-8
Subsequent activity
Months 1-5

Months 1-5 of the SPAC process

Perform due diligence and negotiations

During due diligence, the SPAC will vet various parts of your company (including financials and operations), to decide if it’s the right fit. Also, you might choose to perform reverse due diligence. Diligence can be a time-consuming and involved process, as information must be pulled from all different parts of the organization. You might not have the time or internal expertise to take on the extra work – especially if you don’t have a lot of due diligence experience on your internal team. An outside firm with deep expertise in due diligence can help you assemble the information you need. Once diligence is complete, each party can determine its terms for sale during negotiation.

Announce transaction

After negotiation, you’ll want to coordinate with the SPAC, so you both can announce the transaction to your internal and external stakeholders. You might want to create a schedule for these announcements, so you can make sure everyone is notified at the right time and in the right order.

Prepare for registration statement

Preparing for a registration statement is a long, arduous process and requires many areas of your organization to work together – and for you to work together with the SPAC. While the SPAC is ultimately responsible for the registration statement, you’ll need to provide information. If you’ve never been through a financial statement audit, your financial statements might require some extra time and attention. This could include reconciling and creating schedules and putting financial statements in the right format for regulatory compliance. Or you might already have statements to work with but need help reaching maturity (including working with auditors to resolve issues, creating schedules and memos to document certain accounting issues, and cleaning up accounting). Regardless of where you are in the SPAC process, this step takes a great deal of work – and finding a firm that can meet your specific needs can really help lighten the load. An IPO readiness assessment can help you decide where to focus and create a specific plan for your business.

Months 5-8

Months 5-8 of the SPAC process

File merger proxy

It might be up to your organization to provide significant assistance in the Securities and Exchange Commission (SEC) Form S-4 process, including creating or updating pro forma financial information or other financial statements. Creating pro forma financial information can include preparing accounting analyses for complex transactions and disclosures that will occur upon the deal closing (for example, earn-outs, recapitalization of the post-merger entity, and earnings per share). If you’ve never had to analyze the accounting and disclosure for similar complex transactions, you might need help.

Address SEC comments

The SEC comment process is iterative and requires a substantial amount of back-and-forth communication to finalize the details. It might be worth getting outside help to address the comments, keep the SPAC process moving, and keep your timeline on track.

Get commitment from sponsors and other founders

Historically, some SPACs have struggled with accounting for certain complex instruments or transactions, which can lead to issues throughout the life of the deal – and beyond. The right accounting knowledge and capacity are essential for you to properly vet SPACs that approach your company, and to give your sponsors and founders the confidence they need to consider their proposals.

Close transaction

When your transaction closes, you are officially public – and while it might seem like the end of the SPAC process, in many ways, it’s just the beginning of your entity’s life as a public company. From knowing how (and where) to move money, to navigating through legal and financial reporting and taxes, you'll still have a lot to consider. That’s why it’s beneficial to work with a trusted resource that’s been through this process and is in tune with the current regulatory environment.

Subsequent activity

Subsequent activity

File Super 8-K (4 days post-close)

Compiling a Super 8-K is a massive exercise, and it comes quickly after close – four days, to be exact. This means you have to begin prepping weeks in advance. Because the journey to close can be such a rush, it can be hard to keep on top of everything that’s needed, but it’s critical to get everything correct.

File Form 10-Q (40-45 days after quarter-end depending on filing status) or Form 10-K (60-90 days after year-end depending on filing status)

Once the Super 8-K is filed, you’re on the SEC clock – which can happen quickly – and these deadlines exist throughout your life as a public company. That’s why it’s important to get SEC-ready and resilient well in advance of these deadlines and set up a schedule to keep meeting the deadlines in the future.

Manage the SOX implementation period

Once you’re a public company, you need to comply with the Sarbanes-Oxley Act (SOX) – but requirements will differ based on the characteristics of the post-merger entity. Also, the time frame for certain aspects of the post-merger entity’s SOX compliance can depend on the merger consummation date. With respect to internal control over financial reporting (ICFR), if the post-merger entity qualifies as an emerging growth company (EGC), that means overall SOX obligations might be less than for a non-EGC. While they still need to design and implement ICFR for management to assess on an annual basis, EGCs don’t require an external auditor’s opinion on the effectiveness of ICFR as long as they remain an EGC. A non-EGC’s post-merger SOX requirements related to auditor attestation on the effectiveness of ICFR typically depend on the post-merger entity’s filing status.

Manage ongoing operations

Meeting new requirements is just one part of emerging from the SPAC process. On top of your new compliance demands, you’ll also need to manage ongoing operations, including financial and tax reporting, governance, internal controls, and technology.

Looking to go public on your own through a traditional IPO? This checklist can help keep you on track.

Our team can help you get ready for the SPAC process

Going through a SPAC transaction can be an exciting time for your company – but the timeline combined with extensive requirements can sometimes seem daunting, especially when you’re trying to add staff in the current job market. But you don’t have to do it alone. Our team can help you with any and every part of the SPAC process, from the initial stage of interest to augmenting your staff, and every step in between. Let us help you make your SPAC process successful.  
Simon Little
Simon Little
Chris Denver
Chris Denver
Managing Director, Accounting Advisory
Wanda-Denton-225
Wanda Denton
Partner, Tax