Transitioning from a private to a public company is a momentous occasion in the lifecycle of a business. Companies gain broader visibility, capital, and a substantial responsibility to disclose financial and other information.

Companies taking their organizations public must have a good understanding of the tax, shareholder, and compensation requirements inherent in the process. There are two options to becoming a public company: the initial public offering (IPO) and through a special purpose acquisition company (SPAC). While SPACs entail their own unique complexities, both avenues face a thorough regulatory review process and the same future filing requirements of the U.S. Securities and Exchange Commission (SEC).

A&M is adept at helping organizations plan for and execute on the registration review process, the design of appropriate compensation structures, and the tax implications of going public. We prepare our clients for the scrutiny they will receive as a public company and help them establish the processes to ensure public filings, disclosures, and tax strategies meet requirements.

What’s the Difference Between an IPO and a SPAC?

IPOs have been the traditional route to going public over the years. It’s a process that requires companies to put in place the processes and procedures necessary to obtain SEC approval. Once the disclosures and details are in order, companies raise capital in the markets by selling shares to the public.

SPACs raise capital within their own IPO in order to acquire or merge with a private company. The SPAC does not have any real operations or business model, and it is formed for the sole purpose of acquiring or merging with a private company, effectively making that company public. In most cases, the merger is led by a management team with the help of a sponsor, often a private equity firm seeking to invest in the target company. The biggest difference between an IPO and SPAC is the timespan to complete the transaction. A SPAC transaction often takes between three to six months, whereas an IPO may take up to a year and a half.

How Can IPOs or SPACs Consulting Benefit a Company?

Guiding companies through the IPO or SPAC process, advisory firms are responsible for developing the acquisition strategy, due diligence, valuation, compensation and even negotiation assistance.

Companies often use SPACs as an easier path to going public, since the transaction often involves less market volatility and pricing risk. However, without the established history of the traditional IPO, SPAC transactions often encounter a host of novel issues which must be proactively addressed.

Seeking a public listing, either through an IPO or SPAC, helps companies offer more attractive compensation packages to leadership. Often overlooked, however, are strategies to mitigate tax implications of IPOs or SPACs for executives during the process.

Navigating the requirements and regulations can be complex, and an advisory firm can help companies build the framework to remain compliant and limit tax liability throughout the process.

What Are the Benefits of A&M’s SPACs and IPO Services?

Transforming from a private to a public company presents various operational, accounting, tax, and financial reporting challenges.
 

A&M can perform a detailed assessment and provide actionable recommendations to ensure a clear path forward for transforming from a private to public company. Our assessment focuses on the sufficiency of:
 

• The global operational and transaction structure
• Accounting and reporting policies
• Processes and systems
• Accounting, finance, and tax staff
• Financial statements and disclosures
• Internal control environment
• Executive compensation plans and share pool authorizations
• Proxy advisory firm and institutional investor assessments

Throughout the IPO/SPAC process and beyond, companies will be subject to greater scrutiny and regulatory reporting requirements that will require substantial effort to maintain. The most significant change is the requirement to close the books and file quarterly and annual financial statements on an accelerated timeline. A&M has extensive experience preparing companies for these on-going demands.

Why Should You Use A&M’s IPO and SPACs Services?

Unrestricted by audit-based conflicts, our team provides dedicated, hands-on resources throughout the IPO or SPAC process — working with your management team, auditors, attorneys, and underwriters to ensure quality, timely results without duplicating efforts.

Our experienced team can help ensure the efficient execution of S-1 preparation and accuracy of the required complex disclosures. We also help management address issues raised in the audit, comfort letter and SEC review processes.

Private companies often need expertise to help them transition into a public company, and we have experience helping companies successfully do just that.

Did you know?

In 2020, SPAC IPOs raised almost twice as much as they raised in the previous 10 years combined and had already surpassed 2019 levels by March 2021.

Source: statista