What is a SPAC?

A SPAC (Special Purpose Acquisition Company) is a company with no operational business activities, founded for the purpose of corporate acquisitions with the objective of raising capital through a public offering in order to acquire an unlisted target company or several companies within a certain period of time, usually 6–36 months from the SPAC’s own listing. After this, an application is submitted to list the shares in the merged company for public trading.

A team comprising the SPAC’s founding partners and possible sponsors is principally in charge of seeking for acquisition targets, careful analysis and carrying out the acquisition. The SPAC model is a framework that allows building various types of companies in terms of their investment profiles, and the company’s structure is highly dependent on the strengths and areas of expertise of the founders and sponsors.

The listing of a SPAC acts as an alternative for a traditional listing process, allowing the SPAC to offer the acquisition target a listing framework that enables the target company to immediately access the capital markets. Concurrently, the investment model offers companies in need of capital the opportunity to use the SPAC’s resources and the expertise of the management of the SPAC in expanding and developing operations and improving profitability.

It is inherent in the structure of a SPAC that if the company is not able to close an acquisition, typically within 24–36 months from the SPAC’s own listing, the SPAC will be dissolved.