If you’re the leader of a privately owned company, you may find that your business becomes an attractive acquisition target for a Special Purpose Acquisition Company (SPAC), a company created to raise capital through an initial public offering (IPO) in order to buy another company. SPACs raised $9.62 billion in 2024 and $20.4 billion so far in 2025, according to SPAC Analytics, and they have a finite window of opportunity to put that money to work. 

Being acquired by a SPAC can present opportunities for target companies, but the process and subsequent transition to public company status can be tricky. It’s important to know what to consider before entering into such a deal and how to prepare if you decide to move forward. 

Going public: Are SPACS the right path for you?

Going public through a traditional IPO can be an exciting and rewarding experience for your company, offering a powerful tool that can help you achieve your capital, liquidity, and related needs; But it’s also an enormous undertaking. Business owners often make the mistake of underestimating the commitment of resources needed to conduct a successful IPO and to operate as a public company thereafter.

Being acquired by a SPAC can be an attractive alternative to a traditional IPO or other capital-raising platform because a SPAC will already have the structure ready to operate as a public company. This means the acquired company has a ready-made vehicle for going public, making this endeavor less challenging compared to a traditional IPO. However, like all major financing transactions, a successful SPAC acquisition is complex and involves significant costs, effort, and thorough due diligence.

As you analyze capital-raising options, it’s critical to keep in mind that going public is not an end in and of itself, but rather a means to an end. Like any form of financing, a SPAC transaction should be viewed as a tactical response to a strategic need. As your company grows, it may reach a point in its life cycle where going public becomes the most effective way to raise the capital it needs to deliver on its business plan and meet liquidity goals.

Getting ready for a SPAC transaction

One of the greatest challenges faced by management teams as they prepare to be acquired in a SPAC transaction is effectively handling the due diligence process while simultaneously preparing to become a public company – all under very strict time constraints. (In general, SPACs have roughly two years to complete their intended acquisitions, or else they face dissolution.) Additionally, the moment a company becomes public, it is subject to heightened requirements related to corporate governance, internal controls, external financial reporting, and regulatory compliance. Even in a SPAC transaction, going public isn’t just a matter of flipping a switch – it’s a complete rewiring of your company to function effectively in a public-company environment. 

Specific preparation and reporting considerations for target companies include:

• Company readiness: A target company will need to prepare itself for being a public company quickly in terms of accounting, financial reporting, human resources, etc. A robust, cross-functional project management plan should also be prepared.
• Tax structuring: There may be restructuring activities by a private target company prior to merging with a SPAC. In addition, and as a result of a SPAC transaction, the target company will be legally owned by the SPAC. Accordingly, a SPAC transaction may have an impact on tax status.
• Reporting requirements: The SPAC will make certain filings with the Securities and Exchange Commission (SEC). Accordingly, certain pro forma financial information, audited annual financial statements, and (depending on transaction timing) unaudited interim financial statements of a target company will generally be filed with the SEC. Similar information will also be included in a Form 8-K (commonly known as Super 8-K) required to be filed within four business days after the closing date of the de-SPAC transaction. Certain additional rules were implemented by the SEC to more closely align the required disclosures that may be incurred in de-SPAC transactions with those in traditional IPOs. It is important to engage with the legal counsel early and incorporate the reporting requirements and the due dates into your expected transaction timeline.   
• Financial statements: Target financial statements should be presented in conformity with applicable generally accepted accounting standards and follow requirements of the SEC. The filings would also include certain pro-forma financial information to help investors understand the impact of a de-SPAC transaction as if it had occurred at an earlier date. Accordingly, certain public company reporting, such as Management’s Discussion and Analysis (MD&A), will also be required. After the transaction, the SPAC will be subject to ongoing SEC reporting requirements.
• Additional considerations: The SEC generally requires three years of financial statements. However, a public company that qualifies as a Smaller Reporting Company (SRC) or Emerging Growth Company (EGC) is required to present two years of financial statements. Further, there are other permitted accommodations available to SRCs and EGCs, including with respect to ongoing reporting requirements. Be sure to plan ahead and give yourself enough time to understand these issues and to position your company for this transition.

A SPAC transaction is a significant undertaking that offers the potential for significant rewards. Weigh the advantages and disadvantages. If you decide that taking your company public through a SPAC transaction is the right strategy, start planning right away for this major event in your company’s life cycle. Not only is preparation key, it’s also essential in minimizing the impact of the process on your ability to manage your company’s day-to-day affairs as you make this important transition.