Page 35 - Banking Finance March 2022

ARTICLE

SPECIAL

PURPOSE

ACQUISITION

COMPANIES

(SPACS)

Introduction What is SPAC?
The Special Purpose Acquisition Companies (SPACs)have been SPAC is company with no commercial operations or any
since 2003 in US but have been growing in popularity specific business plan or has indicated that its business plan
throughout the world due to number of reasons like growth is to engage in a business combination (i.e. a merger or
potential of target businesses, time consuming process of acquisition). In other words, a SPAC is formed strictly for the
traditional IPO, credibility of sponsor and availability of liquid purpose of raising capital through an IPO and using those
securities in the post COVID-19 times. funds to acquire an operating business.These types of
companies are popularly known as 'Blank Check Companies'
Since the substantial funds have been already raised by
which are raising blind pool of cash through IPO to acquire
SPACs in the recent past and a significant portion of these a private operating company.
funds remain to be deployed in target across the globe, it is
expected that many more SPAC transactions may be
consummated in the near-future. SPACs bring together experienced management teams,
often comprising industry veterans, private equity sponsors
who can leverage their expertise to raise capital to acquire,
About the author then operate, a new public company.

Gajanan A. Patil The IPO of a large private company is facilitated, in effect
Chief Manager (Faculty)
Rural & Agri-Business Dept., FI Dept. through a merger with SPAC, enabling a private business to
Union Bank Of India Staff College avoid the inherent costs and risks associated with the
Bengaluru traditional IPO process.

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