Seeking or Searching for a Target

An Indian Perspective on Special Purpose Acquisition Companies, GLA-TR-001

form 20% of the SPAC’s total capital and the rest would be occupied by investors (institutional or retail as the case maybe).

The Sponsors are also responsible for selection of Directors, board members and executive management and underwriters. The underwriters for the IPO process are selected for the SPAC to move forward with going public. Underwriters usually receive a higher discount on shares in the Traditional IPO whereas the underwriters of the SPAC IPO receive lower percentage of discount (around 5% discount) of the total proceeds from the SPAC IPO about which only 2% of the discount is applicable for payment at the conclusion of the IPO and the remaining payable discount will be credited to the Trust Account and the payment of the money is deferred until the stage of the successful completion of merger with the target company. If the target company business combination is unsuccessful, then the deferred amount is not liable towards the payment to the underwriters and rather would proceed to the Trust Account for redemption of the shares offered to the public.

Seeking or Searching for a Target

When the SPAC funding is intact, the SPAC can start with the search to seek Target companies for acquisition. The time or search for Target company can extend from 8 months to 2 years. Sometimes, the SPAC can also identify a target industry. The SPAC usually does not disclose the target though the scope of search within a specific industry might be known. The SPAC target searches are usually start-up companies because most companies at this stage contemplate the option of IPOs to go public, raising capital, listing the company. SPACs can be viewed as the most viable and attractive options available for start-up firms since they can provide various solutions that are specifically tailored to the start-up businesses dedicated to formulating the business combination.

This phase is inclusive of several negotiations that take place between the target company and the SPAC. It is the phase where the idea for merger is shared and pitched between the target company management executives and the sponsors. Conducting due diligence, repeated negotiations and arranging additional