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Benefits and Considerations of SPAC Merger vs. Traditional IPO vs. Cash Sale

ADVANTAGES OF A SPAC

SPAC BUSINESS COMBINATION

TRADITIONAL IPO

CASH SALE

PROCESS

  • Merger with SPAC that results in the target becoming a publicly traded company
  • Equity capital raise from public investors
  • Typically primary issuance to fund future growth
  • Sale of entire/partial equity stake to financial sponsor or strategic buyer

TIMING

  • Certainty in as little as 4 weeks
  • Closing in as little as 4 months
  • Up to 12 months
  • No minimum time requirements

BENEFITS

  • Establishes public currency
  • Target company will know valuation at the outset of process
  • More streamlined process / less reliant on equity window than traditional IPO
  • Able to use projections in marketing
  • SPAC sponsor can shepherd target through going public process
  • Establishes public currency
  • Orderly trading post-IPO can support positive momentum
  • Potential for full monetization
  • More traditional transaction process
  • Speed of execution

CONSIDERATIONS

  • Investor turnover can create near-term pressure
  • Can be dilutive
  • Valuation uncertainty until pricing
  • IPO windows can be unpredictable which may prevent ability to execute
  • Expensive and lengthy process
  • Limited potential for equity rollover
  • Limits ability to participate in future growth
  • More dependent on debt financing market conditions