While the Special Purpose Acquisition Company (SPAC) took form in the 1990s, there has been a surge of interest in the last few years.
In the first quarter of 2019, 14 SPACs raised over $3 billion, almost exceeding the issuance from all other types of IPOs combined and setting a pace to exceed the $10 billion raised in new SPAC listings last year.
So what does this mean for internal communications teams and PR agencies involved in SPAC deals?
Even though SPACs may be referred to as a type of IPO, there is a very different playbook for successfully executing the deal compared to a traditional IPO, which includes strategic and tactical best practices for telling the story and a new set of important mile markers required in your PR campaign plan.
As a primer, a SPAC, or “blank-check” listing, is a shell company without assets, often led by a small team of seasoned public company executives or financiers, that has an IPO to raise cash for an acquisition—which typically needs to be completed within 18-24 months, under SEC regulations.
This entity has a ticker symbol, generally with a price per share in the range of $10 and a market capitalization of $150-$300 million, although those stats will vary.
So once the SPAC is set up, the clock starts toward finding a suitable acquisition target, which is executed more like a reverse merger as an alternative way for a fully operating private company to enter public markets with a liquidity event for its investors and other shareholders.
In part, this is why SPACs have risen in popularity among private equity investors, whose cash has been parked in either stressed or growth companies. This type of deal offers an enticing exit path, with a faster timeline to public markets at a fraction of the cost, while also generally producing fewer distractions to the executive operating team at the acquisition target, relative to the rigor of preparing for and executing a traditional IPO.
3 Key Phases to Communicating Your SPAC
The first rule of the SPAC club is that you can, should, and must talk about your SPAC. This is a big departure from traditional IPOs, where a quiet period is enforced to mitigate “hyping” of an upcoming listing.
Conversely, SPACs are actually encouraged to broadly communicate the merits of the transaction. So while PR and communications teams essentially go into hiding (at least from the press) once the public S-1 is flipped for a traditional IPO, the intent-to-acquire announcement in the SPAC process represents the most critical and most compelling media moment and lightening-strike event in your publicity strategy.
Technically the start of the De-SPAC process, this initial deal announcement when the SPAC makes public its acquisition target actually has the most press appeal. This officially begins a high-stakes, condensed timeline to complete the transaction, so it is critical to maximize coverage at this phase.
The press you should target will be a mix of capital markets reporters (with IPO and alternative financing interest), beat reporters of that particular industry segment and relevant trade media outlets, along with regional papers and business journals. And from a deal perspective, the resulting media coverage offers momentum and added validation to help investors on both sides of the acquisition come together to get stakeholder buy-in and proper approvals required to close it—which could take one to three months, or sometimes more.
In the time window between the Deal Announcement and the Deal Closing, both the SPAC and target company must actively market the transaction to current and potential investors, financial analysts and the media.
So part of the PR campaign strategy, from the outset, is to identify thought leadership and news items that can be scheduled, pitched and placed in this Deal Marketing time period.
Again, the purpose is to build on the momentum of the resulting coverage and excitement of the Deal Announcement, while the SPAC and target company parties are finalizing deal points and shareholder approvals. And while investor relations teams are engaging directly with financial analysts and executive teams—privately in the board room as well as publicly at investor events and road shows—the PR team needs to be maintaining a media drumbeat and market visibility for the deal as much as the companies and executives involved.
Remember, an IPO has technically already occurred back when the SPAC was setup and money for the eventual acquisition was raised. So while there still may be a bell ringing ceremony upon closing of the deal, the event itself is actually a re-listing of the officially combined entity, with a new ticker that represents the organization. Granted, this phase may lack the sizzle of a traditional IPO, but it still represents a capital markets event worthy of media coverage—with appeal to Wall Street reporters as well as industry trade and local/regional press.
As you can see, a specially designed SPAC PR plan is essential to position the transaction so that existing as much as potential shareholders find the combination attractive.
The merits of any deal need to be clearly articulated to receive necessary approvals, and a clear, coordinated communications program targeting all important constituents—from employees and customers to investors and the media—is critical for overall success.
So once you are done talking SPAC, it’s time to crack open the Public Company PR playbook, since it is only the start to a long journey in the capital markets.
Kevin McLaughlin is managing director at ICR.