Special purpose acquisition company (SPAC)


Special Purpose Acquisition Companies (SPACs) represent a streamlined structure used to raise capital during an IPO process. 

They have been used for many years but recently gained popularity with private equity firms and investors wishing to raise capital through an IPO.

SPACs and private equity

SPACs have recently attracted big-name underwriters and investors while raising a record amount of IPO money. In 2020, SPACs raised close to $100 billion in public offerings which represents a 320% increase in the number of SPAC IPOs compared to 2019.

SPACs are being sponsored by a wide range of people and institutions, from private equity funds to experienced management teams to corporate investors.

With their background in deal origination, financing and value creation, private equity firms are naturally aligned with the SPAC structure and have been involved in >10% of the SPACs that have been raised over the past 15 months.

Why are private equity firms drawn to SPACs?

When professionally supported, SPACs can:

  • Provide a more efficient and faster IPO process
  • Lower financial transaction costs
  • Give greater control over deal terms
  • Create greater certainty in pricing (due to simplified price discovery process)
  • Provide greater access to capital (through retail investors)
  • Release liquidity options not always available to private equity
  • Allow for the pursuit of larger targets
  • Require fewer disclosures to investors at the time of the IPO (compared to existing operating companies)

We support SPACs at scale

We are already a recognised top tier provider of fiduciary, governance, administration and reporting services, across multiple asset classes. Based on our unique capabilities and over 50 years of combined experience, we are able to provide you with a full spectrum of support throughout the SPAC realisation process.

We work with private equity firms, law firms and existing SPAC sponsors. Our team has been involved in a number of SPAC deals in the US and Europe. We recently supported Pegasus Europe who raised €500 million in a private placement, the largest European SPAC to date.

Pegasus Europe

IQ-EQ Netherlands worked with Tikehau Capital alongside co-sponsors Financière Agache, Jean Pierre Mustier and Diego De Giorgi to launch Pegasus in February 2021. Following a successful IPO, Pegasus Europe began trading in April. It is set to focus on investments in Europe’s financial services sector, with potential targets including asset management platforms, insurance services, diversified financial services companies as well as financial technology companies. Led by director Emma Causevic, IQ-EQ Netherlands is delivering a full suite of  corporate services to Pegasus Europe, including audit assistance, accounting and reporting, corporate secretarial, registered office, tax compliance support, HR administration and payroll services.

Our Services

Talk to us and we’ll build a bespoke process to suit your requirements.

Structure formation

During the entity formation stage, the SPACs structure and management team are established and the entity is registered as a company. Applications are subsequently made to the relevant regulatory body (for example, CSSF or SEC); auditors, legal counsel and investment bank are appointed; and a trust/escrow account is opened, ready for the day of IPO. The prospectus for the SPAC is drafted and once approved, the capital raising phase begins.

  • SPAC and management team set up
  • SPAC is registered as a company
  • Auditors, legal counsel and investment 
  • bank appointed
  • SPAC prospectus is drafted
  • Application to relevant regulatory body (i.e.  CSSF or SEC)
  • Set up a trust/escrow account, ready for the day of IPO
  • After approval of the SPAC prospectus - start raising capital

How can IQ-EQ help?

  • Draft customised SPAC and SPAC sponsor launch checklist
  • Conduct launch call with client (and counsel) to review status of all launch items and annotate the launch checklist accordingly
  • Review all materials created or started prior to IQ-EQ engagement and update as necessary
  • Assistance in evaluating and selecting key service providers
  • Prepare and file certificate(s) of formation/incorporation
  • Prepare and file any foreign out-of-state certificate of incorporation (if applicable)
  • Obtain U.S. tax EIN, VAT identification number, LEI registration
  • Coordinate with legal counsel in drafting by-laws 
  • Articles of incorporation and any other related governing documents
  • Initiate trademark registration (if applicable)
  • Produce and maintain a website for the SPAC
  • Obtain EDGAR codes and CUSIP(s) (for US domiciled SPACs)
  • Assist in obtaining exchange listing
  • Initial registration statement (i.e., Form S-1/Prospectus)
  • Work with legal counsel in reviewing and drafting responses to comments from relevant authorities
  • Work with counsel in preparing board books for initial board meeting (i.e., board meeting agendas, board resolutions, minutes, etc.)
  • Provide audit assistance and prepares (interim) financial statements
  • Provide CFO support services


During the second stage, the SPAC company is listed on relevant stock exchange by the underwriting bank and is now a publicly traded company.

How can IQ-EQ help?

  • Quarterly reporting
  • Annual accounts and mid-year accounts including audit support
  • Facilitate and assist with treasury (i.e., cash management/movements and cash controls of the SPAC)
  • Preparing, attending and taking minutes of the board meetings
  • Prepare and maintain accounting books and records (i.e., cash journals, ledgers, accruals, trial balances, etc.)
  • Record transactions
  • Schedule payment of invoices – expense processing and bill payment
  • Prepare Form 1099s
  • Assist in and oversee the preparation of draft regulatory and financial reports
  • Oversee the preparation of draft financial statements for audit, and the tax return preparation
  • Coordinate the timely preparation of tax returns with tax preparer
  • Review and help facilitate tax filings
  • Conduct relations with custodians, trust depositories transfer agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable

Target Search and Acquisition

After the IPO, proceeds are credited to the SPAC’s trust/escrow account, where they are blocked until acquisition of the target company.  The SPAC management team then seeks potential targets.

How can IQ-EQ help?

  • Assist in the day-to-day SPAC operations, managing all operational relationships of the SPAC
  • Work with counsel on drafting and preparing board meeting materials (i.e., board meeting agendas, board resolutions, minutes, etc.)

Shareholder vote, approve and merger

Once the SPAC management team and the shareholders of the acquisition target company have agreed to merge, the SPAC shareholders (IPO investors) approve the envisaged acquisition.

How can IQ-EQ help?

  • Preparing, attending and taking the minutes of the extraordinary shareholders meeting

Entity now public / PE exit option

After the shareholders’ approval, the acquisition takes place and the acquired company will be merged into the SPAC, thus becoming a listed company.  The “de-SPACing” of the original entity begins.

How can IQ-EQ help?

  • IQ-EQ can assist throughout the de-SPACing process and provides administration and a full fledge service to the newly formed listed entity.


What is a Spac?

SPACs are essentially shell companies that initially have no commercial operations, formed solely to raise capital through an IPO. Before a SPAC has a specific target (an existing privately held company) in mind for acquisition, it raises funds through a public offering of the SPAC’s equity securities. The SPAC sponsors usually retains 20% of the post-IPO SPAC. Capital is then placed into an escrow account until the SPAC acquires a target company.

This process is called a “business combination,” and a SPAC typically has up to two years to acquire a target in such a combination (though specific rules vary by country and legislation). If the SPAC can’t acquire a suitable target within that time, money is returned to the investors.

What makes SPACs so appealing for Private Equity?

With their experience in deal origination, financing, and value creation, private equity firms are natural allies of the SPAC structure and model—and indeed, PE-backed SPACs make up about 10% of the SPACs raised over the past year and a half. 

What are the advantages SPACs offer private companies compared to traditional IPOs?

  • More streamlined and faster IPO process
  • Lower financial transaction costs
  • Greater control over deal terms
  • Access to sponsors’ management expertise
  •  Greater market certainty
  •  More access to capital
  •  Fewer disclosures to investors at the time of the IPO

More than anything, SPACs have created an alternative path to liquidity for investors and businesses anxious to avoid a long (and costly) IPO process. Going public has always been a challenge, but markets were especially volatile during the 2020 pandemic, and companies were understandably anxious about how those ups and downs would impact their listing. SPACs are a faster—and, arguably, less risky—path to going public, especially for small to mid-sized companies without a strong IPO story to tell.

SPACs also offer investors a path to involvement in interesting, often undervalued companies outside of a formal IPO or funding series. For sponsors, SPACs provide a permanent capital vehicle, a more diverse set of targets, and liquidity options that aren’t always available to a traditional PE portfolio company.

Finally, they’re a straightforward way to make money, including a sort of “money-back guarantee” that’s rare in the world of PE. If the SPAC doesn’t identify a target company within 18-24 months, investors are entitled to a return of their investment. And because investment capital is held in trust before the SPAC acquires a target, investors can choose whether to reclaim their investments (including interest) or convert their shares into a stake in the merged company.

How does Private equity view Spacs?

In the world of high-risk, high-return investment, competition is nothing new. PE firms have been competing for high-quality assets since well before SPACs exploded onto the scene. But there is undoubtedly potential for overlapping targets between SPACs and PE firms, and PE firms have expressed justifiable concern about the impact SPACs could have on deal flow and valuations.

Existing SPACs are on track to announce deals valued at more than US$800 billion over the next two years. (Compare that to an average year for private equity, which might see something between $500-$550 billion in deal value.) That’s a tremendous amount of capital for the private equity world to digest, particularly since institutional investors have grown more cautious as the market continues to fluctuate which usually result in more difficulty to access capital calls.

But studies indicate that SPACs might be more opportunity than threat for PE firms. Only 8% of fund managers surveyed in November 2020 for Preqin’s 2021 Global Private Equity & Venture Capital Report said they had competed with a SPAC for an acquisition, and just 1% of those had actually lost out on a deal. Surprisingly, 64% of respondents said that SPACs had no impact on their business at all.

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