SPAC Attack: Who’s On First?

Bud Abbott: Well, let’s see, we have on the bags, Who’s on first, What’s on second, I Don’t Know is on third…

Lou Costello: That’s what I want to find out.

Bud Abbott: I say Who’s on first, What’s on second, I Don’t Know’s on third.

Lou Costello: Are you the manager?

Bud Abbott: Yes.

Lou Costello: You gonna be the coach too?

Bud Abbott: Yes.

Lou Costello: And you don’t know the fellows’ names?

And that begins today’s discussion on SPAC transactions.

SPAC transactions move fast. They move so fast that it can be difficult to know who Is doing what, and when. The first thing you need to identify your team. Unless you are part of the inner circle, much of this will likely be done before you even know about the potential transaction. Once you are brought into the process you need to learn who’s on the team and what they will be delivering. Then you need to take that information and determine how many of those people will need to work with on your compensation deliverables. This sounds like a normal process, but it will all happen over a few days (if you’re lucky.)

1. You will work with legal on old and new cash incentive programs
2. You will work with HR, Finance, and Legal to gather information to complete CD&A and proxy filings.
3. You will work with outside compensation and benefits counsel to determine new equity compensation plans.
4. You will work with securities attorneys to determine the timing and details for SEC filings related to pay.
5. You will probably be asked to do research and modeling of Executive and Board compensation.
6. You will again work with Finance and Legal to answer questions about employment agreements, performance metrics, and other issues that may directly or indirectly impact pay.

And that’s just weeks 1 and 2 (maybe 3).

Smart companies will assign a very strong project manager who does little else other than herd a bunch of cats toward a common goal. I do not recommend you volunteer for this position. The amount of work that needs to be done by total rewards professionals is enormous. You will be challenged by deadlines, new issues, data inconsistencies, and questions about everything you have done for several years. You will be asked to run models of things you didn’t even know could be modeled. You will often do much of this with a fraction of the information you want or need. You will not have the time to be in control of anyone except yourself. This is a good time to not be a hero.

Your job is to do in 3 months all of the work that a typical pre-IPO company does over about 12 or 18 months. You cannot clean your data up too soon. You cannot get organized too early. If your company has had any aspiration of going public in the next two years, you should assume that a SPAC may happen before the end of 2021. In Mid-March my next post will provide a summary of the things you will want to include in your work effort. The list is daunting but achievable. In the meantime, get your rest. You're going to need it!

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.