SPACs have many critical inflection points, but the De-SPAC process is truly special First a SPAC is formed and goes public. Then the SPAC finds you, a beautiful company in the rough, just bursting to experience growth and success. Then you both agree to join and beat the world. You announce your intentions in a big splash and the De-SPAC process begins.
It’s kind of like when two young people get engaged early in a relationship and hoped that their parents and their lives would bolster them through a successful wedding day. Most of the time it works, but some engagements end because the additional scrutiny proves the pairing will not work. Others end in someone getting left at the altar. Successfully navigating this period requires resolve, enthusiasm, openness, and some luck.
The De-SPAC process usually runs from 3-5 months. During this time both parties work to convince current and potential shareholders that the union will work. Regulatory bodies like the SEC also get involved and provide their opinions on the impending marriage. The companies involved may also look to bring in additional funding via a PIPE transaction. There is a ton of work and if things go wrong, the deal falls apart.
Much of this is out of the hands of compensation professionals, but there are areas where comp pros must be on point.
First, you must communicate with your employees. The De-SPAC process starts when the world knows about the deal, this means your employees will know. They will be curious, anxious, excited, confused, and looking to the company to fill in the blanks. This is a GREAT time to use communication professionals. Get some help!
Next, everyone will be watching to see if the company is performing well. This means no major snafus in the execution of incentive plans and no major employee relation issues. If there are important compensation issues on your “to-do” list, you need to get the support you need to quickly address them. In today’s environment, this may mean addressing Diversity, Equity, and Inclusion issues. It may include clean-up work on equity awards, better clarity and automation of your annual or sales incentive plans, and reworking of your 401K and other benefits plans. Get some help.
If the De-SPAC process is successful, current and potential shareholders will support the deal. Regulatory bodies and auditors will find the facts acceptable, and employees will remain supportive and enthusiastic. You will become a publicly traded company and your stock price will rise.
If the De-SPAC process fails shareholders will redeem their investments, basically demanding a refund before the deal is done. Your company will not become publicly traded and there is a real risk that your company will not survive at all. Being left at the altar of a SPAC deal can make it hard to find new investors as a private company.
For those people who have gone through an IPO, the De-SPAC process can feel familiar. The excitement of potential is balanced with the palatable risk of failure. The big difference is that failed IPOs usually have much softer landings.
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.
Useful information! Thanks for your post
Posted by: Colver Long | 04/21/2021 at 03:38 AM