The 4 phases of a Special-Purpose Acquisition Company

Prior to the IPO, the founders of the SPAC invest a small amount of initial capital to form the SPAC and hold all of the pre-IPO equity. Here is how to get from an idea to a succesful acquisition.

SPACs have a simple model: raise funds from the public markets, then find a company to merge with.

There are special structural characteristics in a SPAC, but it offers private equity sponsors a number of serious advantages in terms of transaction objectives, structure and return on investment. The SPAC IPO market has recently experienced considerable demand and continues to prosper. All this has further encouraged private equity sponsors to take advantage of SPAC’s benefits. We will give you an insight into the different phases of a Special-Purpose Acquisition Company from the idea to a winning transaction.

If a SPAC fails to complete a business combination within the specified time frame, founder shares and private placement warrants will become worthless. This builds an immense financial pressure for a Sponsor to get a deal done.


The process is governed by the SPAC management team in accordance with the company’s shareholders. No cash compensation is paid to the management team, but they are rewarded with initial shares of the SPAC before the IPO – so called Founder Shares. These executives should have a positive track record in public listed companies and be experienced in M&A as well as in the targeted industry.


The SPAC process is started by engaging securities counsel, the investment bankers, consultants and the public company accountants. This process is initiated by the Sponsors, who finance approx. USD $750,000 for the costs of going public and provide the company with seed capital of usually 5% of the expected IPO proceeds. Approximately two-thirds of the expenses are for the advisors and for the listing of the company on the stock exchange, with the remaining expenses taken out of the IPO proceeds. The 5% capital invested by the sponsors is held in a trust account, which is subject to the provisions of the securities prospectus (“S-1”).


Preparing to go public

Preparing the IPO is a task where a reliable and vivid communication has to be orchestered between the involved parties.

Most management teames have little or no experience with the details about going public with a company. We recommend leading advisors and servicing companies in the SPAC segment of an IPO as well as adding our experience. Further, we secure the communication between all involved parties.

The individual steps until the IPO:

  • Engage counsel and auditors
  • Incorporate SPAC and sell founder shares
  • Prepare Form S-1, the offering prospectus
  • File S-1 and amendments responsive to SEC comments
  • Negotiate underwriting and ancillary agreements
  • Road show, pricing and closing

After the IPO

After the IPO, the proceeds are paid into the trust account. There are deductions from the total amount in the trust account: the investment bank receives a standard 2.5% fee out of this amount for the underwriting. Some of the sponsor capital is held in trust in addition to the 100% of the IPO proceeds. A typical SPAC may have 102% in trust which comprises the IPO proceeds plus 2/5th of the sponsor capital. An acquisition budget is usually created from the remaining sponsor capital not held in trust.

SPACs are typically structure to allow the team 18 months from the day of the IPO to complete the acquisition, including identifying the targeted company, negotiations, due diligence, etc. An extension of this timespan depends on a shareholder vote. S.E.C. regulations rule out any time longer than 36 months. If the SPAC has not completed a business combination or acquisition within the given time, the capital in trust is returned to the participating investors. Once the acquisition negotiations have been successfully concluded, the SPAC will make an offer to its shareholders: It is common to offer the shareholders to approve the intended business combination, or to buy back their shares. Having said so, shareholders will prefer to keep the shares and approve the business combination once this appears lucrative. To market this proposed transaction, a second road show is held to present the acquisition plan to the shareholders and a selected group of institutional investors.

In some SPACs a backstop is structured to provide backup financing in case some of the shareholders decide to redeem their shares.

  • The SPAC must conclude its acquisitions within 18-24 months of the IPO.
  • Up to 102% of the IPO proceeds are held in trust pending shareholder approval of the acquisitions.
  • SPACs typically reserve cash from the IPO proceeds for an acquisition phase budget to cover legal and accounting due diligence expenses.
  • SPACs typically acquire companies with enterprise values 2 to 4 times the IPO proceeds.
  • If a larger market clearing transaction can be negotiated that exceeds the SPAC’s ability to finance the acquisition, the investment bankers are prepared to raise the additional equity and debt.

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Features of a SPAC

Special Purpose Acquisition Company IPOs differ significantly from traditional equity IPOs. It is important for investors and business professionals to understand the difference:
Third Party Escrow
100% + of cash held in trust
Target Enterprise Value must be 80% of net assets
Ensures that only targets of a minimum size are proposed
Shareholder Approval/Tender offer
Only well-received transactions get approved
Management Ownership and Concurrent Investment
Incentivizes management to find and close a deal
Escrow of Insider’s Shares
Insiders do not participate in a liquidating distribution for interests held prior to IPO
Deal Deadline
Limits the time of capital investment

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Who is Celtic?

We are a network of experienced financial advisors, attorneys, auditors and other professional business consultants in 4 countries with more than 25 years of business experience and specialized on SPAC.


Although the general IPO process of a SPAC is very standardized, the decails are important in individual cases. It is important to have specialized lawyers, a successful investment bank and experienced consultants at your side.

SPAC projects

We are presenting you an overview on recent and upcoming transactions.

Here is a selection of  SPAC projects where we are involved.

Celtic Asset & Equity Partners Resources to Bring Ideas to Life
In every Special-Purpose Acquisition Company we create, we are co-partnering together with our clients. Our success and our compensation depends on a positive execution of each SPAC: We trust in our competencies and those of our clients.