by Deloitte & Touche LLP

In a traditional initial public offering (IPO), the company builds toward the first day of trading as a consequence of the pre-IPO process. A traditional pre-IPO company produces SEC-compliant audited financial statements, designs and implements systems to facilitate timely and reliable reporting, builds internal controls over financial reporting, validates processes critical to cybersecurity and information technology, and prepares critical filings for regulators and investor review.
The SPAC process involves many of these same hurdles, but the target company’s management must remain focused on executing the transaction first before tackling post-SPAC processes.

Since no two post-SPAC companies are the same, the plan and workload will need to be tailored for each company, with likely many of the work streams running on parallel tracks:

Finance and Accounting: Closing financial reporting and quarterly earnings and other financial disclosures on time.

Corporate governance: Corporate board oversight is essential prior to listing; a portion of the board must be independent and non-management, and board members need to understand their responsibilities and fiduciary duties from day one. Overall governance measures need to be in place throughout the organization.

Internal processes & controls: Even prior to reporting the first quarter of earnings as a publicly traded company, significant controls and processes need to be in place to meet regulatory requirements. These center around rules, often in the Sarbanes-Oxley (SOX) Act of 2002, to create internal controls and related policies that are aimed at safeguarding of assets, reliable financial reporting, and reducing the risk of fraud.

Information Technology (IT): With information being a crucial asset in the modern corporation, IT as the custodian and protector of this information has a front-row seat for major executive-level issues and discussions. But many organizations in the post-SPAC phase have comparatively bare IT organizations and capabilities in place.

Cyber: Related to IT, an organization’s cyber capabilities will be tested every day. But because so much of an organization’s operations and value is tied with its ability to protect data and maintain operations after a cyber threat is discovered, this capability can’t be delayed.

Tax: Tax is often central to financial reporting and transaction planning. The post-SPAC company can emerge in a much more complex tax situation than prior to the SPAC transaction.  Many of these complexities relate to the resulting tax structure, which is designed to accommodate both the legacy owners of the company and the shareholders of the SPAC. 

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For additional information contact:
Hiral Shah
Audit & Assurance Managing Director
Deloitte & Touche LLP