Special purpose acquisition companies (SPACs) have no commercial operations. They are formed strictly to raise capital through an initial public offering (IPO) that it can then use to acquire or merge with another company. After a period of relative obscurity—they were most popular in the lead-up to the 2007–2009 financial crisis—SPACs had a remarkable resurgence in the early 2020s, with a record-breaking number of SPAC IPOs and mergers, before quieting down in the mid-2020s.
SPACs operate on a straightforward premise: They raise capital through an IPO, place the funds in a trust, and then have a limited time frame (usually 18 to 24 months) to identify and merge with a target company.
If a suitable target isn’t found within this period, the SPAC is liquidated, and funds are returned to investors. This structure offers unique advantages and risks for sponsors and target companies.
For support and additional information, explore our SPAC and de-SPAC Solutions.