One of Wall Street’s hottest trends today is the emergence of SPACs, or special purpose acquisition companies. A SPAC is essentially a shell company that is set up by investors to raise funding through an initial public offering (IPO) to acquire another company. Money raised during the IPO goes into an interest-bearing trust account until the SPAC management team identifies an acquisition target and completes the acquisition. Once this transaction is complete, the initial IPO investors can either elect to redeem their original shares (plus interest) or swap their shares for shares of the merged company. SPACs have 24 months to complete this acquisition process. If no acquisition takes place after 24 months, the SPAC is liquidated and the money plus interest is returned to the shareholders.
From a systems perspective, you can look at ERP system needs at two separate points in the SPAC lifecycle: pre-acquisition and post-acquisition. This blog post will focus on SPAC ERP needs during the pre-acquisition phase.
The SPAC Pre-Acquisition Phase
A SPAC has little or no operations during the pre-acquisition phase. Despite this, it is still subject to SEC filing requirements such as the periodic filings of 10-Qs and an annual 10-K. In addition, pro-forma financial statements for planned mergers that provide a comprehensive view of the SPAC merger will also be required. Not only does the SPAC face these immediate SEC mandated financial reporting needs, it also must consider the financial market’s expectations. Financial analysts will want to know that the SPAC has a plan in place to meet not only the early SEC financial reporting requirements, but also the long-term financial reporting and control requirements of a publicly traded company.
At this point in the SPAC lifecycle, it will also be important to start to look at the systems in place at the target companies to assess their operational systems and ability to meet the same public company expectations.
Sikich recommends NetSuite as an ideal ERP solution for the SPAC pre-acquisition Phase. This recommendation is based on:
- The out-of-the-box financial reporting capabilities that will allow for easy creation of the 10-Q and 10-K financial reports.
- Its strong multi-company functionality, allowing for easy creation of multi-entity pro-forma financial reports.
- NetSuite’s ability to provide the infrastructure needed to meet the long-term financial reporting and control requirements of a publicly traded entity.
- NetSuite’s value as a proven and known platform, providing confidence to analysts the SPAC is putting the right tools in place for long term success.
- The functional diversity of NetSuite, providing long term value as the SPAC acquires diverse businesses.
Implementing NetSuite for SPACs
Sikich is the right partner to help implement NetSuite for SPACs. We are a Five-Star NetSuite partner and currently have over 30 publicly traded clients live on NetSuite. Many of these clients engaged Sikich and our NetSuite practice pre-IPO. We understand the needs of a publicly traded company and how to design and implement NetSuite around these needs. Our process-focused implementation methodology allows us to design an initial system with the plan for growth in the future. Long term, we offer a predictable cost model through our managed service support plans and consistency in consulting resources and implementation approach as new operational entities are added.
Have any questions on how NetSuite can be the best ERP tool for your SPAC? Please contact us at any time.