Are you prepared for the SPAC Call?

Has SPAC become the next “Four Letter Word”? HOPE…GOLD…FOOL…something else?!! 

Have you had one of these conversations recently?

Ring / Ring (Call from Board Member) CEO (to Board member): Hey there – thanks for the call – what’s up? 

Board Member: Hey, have you thought about doing a SPAC?

Across countless Board rooms and Zoom calls CEO’s, CFO’s and Investors are talking about SPAC’s and whether to raise capital through this complex and innovative financing vehicle. 

As a Partner at Kingsley Gate Partners, a global executive search firm, I am struck by the sheer volume of companies and leadership teams that are considering SPAC IPO’s or are now recently public, and now facing the realities of life as a public company. Over the next few Blogs I want to share some of our “crowd sourced” insights from entrepreneurs, investors, CFO’s and CEO’s. As many of our clients are leaders of public companies we will share insights in general terms as we do not want to run afoul of public company disclosure rules. 

Why consider doing a SPAC?

• It allows me to raise capital faster than the traditional IPO process. One entrepreneur CEO stated that a fully completed SPAC IPO listing can take 3 months which is much faster than the typical IPO process (could take up to 6 months or longer). Again please check with your bankers on exact differences, but this is what I have heard from several management teams.

• You can articulate your business prospects with more degrees of freedom versus a traditional IPO. I think this is one reason companies pursuing large markets with break through technology (think space companies, LIDAR, EV, etc.) are pursuing SPACs because you have more flexibility in how you articulate the story and gage investor demand. 

• You can raise more capital and access more flexible pools of capital (Hedge Funds, Special Situations, Institutional and Retail). You can provide liquidity to your VC’s sooner and raise potentially larger pools of capital than doing a Series E/F/G as a bridge to a traditional IPO. Raise money when you can, not when you need it (an old adage from my investment banking days which I think still rings true).

• Your competitor just raised capital and competing with a bigger balance sheet. SPACS just added 237 new PUBLIC companies in 2020 with gross proceeds raised of $80Bn. Are you able to compete with your capital base when your competitors are “pre-funding” their business plans for the next 3-5 years?

Are you prepared from a leadership and Board perspective for the challenge and opportunity of listing through a SPAC?

• Build your adviser network NOW. Bankers, lawyers, accountants and executive and Board recruiters! There is a war for talent and timely, good advice. 

• Act on the opportunity to build your Board for the long-term and broader ESG and diversity goals. Many VC’s and private investors come off public Boards after 6-12 months of an IPO. Get ahead of this and initiate a “Board Refresh” program.

•  Pressure test yourself and leadership team. Look in the mirror and identify leadership and competency gaps and act NOW. Mark my words – we will have spectacular flame outs of recently public SPAC’s. Do you have the right team in place to handle the scrutiny, new pressures while still building a valuable business that someone wants to own for longer than the second it takes to hit “sell”?