Looking to go public with your business? Taking that next step in your business strategy can be a great idea. But it can also be a serious hassle.
Going public comes with a lot of legal work to go through. Mountains of paperwork and legislation make the process slow and cumbersome to navigate through.
This is what makes SPACs so popular. Otherwise known as special purpose acquisition companies, these can help you bypass the legal headaches of going public
What is a SPAC, and how do they work? Let’s take a look.
What Is a Special Purpose Acquisition Company (SPAC)?
A special purpose acquisition company, or SPAC for short, is a company designed specifically to acquire an existing company. They do so by raising capital through IPOs, or initial public offerings.
They’ve existed for decades, but in recent years they’ve seen a huge upsurge in popularity. 2020 alone saw billions of dollars raised by over 50 new SPACs.
How do they work? SPACs are formed by an investor or a group of investors. A key feature of SPACs is that, while they are designed with acquisitions as their goal, they avoid ever declaring an explicit target.
The reason for this is so they can avoid having to make disclosures during the process of the IPO. This saves a lot of time and hassle for the investors.
Why are SPACs so popular? A big reason for their surge in popularity is their attractiveness for smaller business owners.
Selling to a SPAC can often put much more money in the pocket of the person selling than other deals might. Compared to normal private equity trades, SPACs can net as much as 20% extra money for the business owner.
If you’re a small business owner, this extra money makes dealing with SPACs an incredibly attractive proposition.
Not only that, but due to the nature of SPACs, these deals can often be made and closed much faster than ordinary IPOs. They also are much less affected by the market trends as a whole, making it easier to make a sale in an uncertain market.
Of course, not every SPAC is going to want to deal with every small business. They may be good for you, but at the end of the day, the SPAC is looking to profit as well.
If you’re interested in doing business with a SPAC, there are people who can help you make that decision. SPAC merger advisors can analyze your business to determine if a SPAC deal is right for you.
Go Public Through SPACs
Deciding to go public is a major step for a business owner. The process can be long and tedious. Dealing with a SPAC can speed up the process while putting extra money in your pocket.
Have any other questions about business, finance, or other career opportunities? Be sure to check out the rest of our site. We have plenty of great articles on a wide range of subjects.
