A PSPC merger typically requires several steps of legal/equity restructuring that affect the tax status and considerations of the target company. Special Purpose Acquisition Corporations (SPACs) were the financial and legal blow of 2021 before they weren`t. PSPCs have broken records and, to some extent, supplanted conventional IPOs (C-IPOs), although IPOs have also been booming. There are numerous Delaware court decisions that state that the legal effect of a fully informed shareholder vote on a transaction is that the business judgment rule applies and indemnifies the transaction from all attacks except waste, even if a majority of the board approving the transaction was not altruistic or independent. See In re KKR Financial Holdings LLC Shareholder Litigation, C.A. No. 9210-CB (Del. 14. October 2014) These legal myths were not primarily aimed at inexperienced private investors, but at business journalists, sophisticated SPPC sponsors, and owner managers of PSPC targets. They illustrate a broader and underestimated fact that complex tax innovations allow project developers to exploit the “credible” nature of professional advice, maintain a kind of deep or indirect deception not covered by fraud law, and distort markets and asset prices longer and longer than conventional theory suggests. To mitigate these market distortions, regulators need to speak frequently and clearly about the law and its uncertainties, at least when a product reaches the commercial significance achieved by PPCS in late 2020 and early 2021. Speaking clearly about their legal uncertainties is a role of regulators that is distinct from addressing concerns about significant sponsors and potential rule changes for disclosure of conflicts and divergences of interests, their costs and risks, the massive turnover of investors around the PSPC-De, and their expected financial performance, and who should be considered a subscriber to a PSPC-De.
Of course, the projections are woven into the fabric of fusions. They help, of course, to “sell” the deal, but they can also be a key element for boards and other participants to negotiate and understand the economics – indeed, fairness – of the transaction. In addition, as in Delaware, state law may require disclosure of projections used by boards of directors or their advisors in these transactions. [8] Participants and their advisors are accustomed to – and expect to – preparing and disclosing forecasts for acquisitions, including de-PSPCs. However, I am concerned that, in the circumstances of these transactions, participants have not considered the full legal implications of these statements. In the rare event that a vote of PSPC shareholders is not required, PSPC is required by its governing documents to make a tender offer to purchase the shares and to file tender offer documents containing substantially the same information as in a proxy statement. Although a shareholder vote is not required by law, PSPC may submit the PSPC transaction to a shareholder vote for commercial reasons. This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered publicity under applicable national law. As of 2018, the top five law firms with SPAC IPO legal assignments are Ellenoff Grossman & Schole; Skadden, Arps, Slate, Meagher & Flom; Graubard Miller; Winston and Strawn; and Kirkland & Ellis. [6] The accounting acquirer is the entity that acquired control of the other entity (i.e., the acquired entity) and may be separate from the legal acquirer.
If it is determined that the target entity is the accounting acquirer, the transaction is treated in the same manner as a capital raising event (i.e. A reverse recapitalization). If PSPC is determined to be the acquirer on the balance sheet, purchasing accounting is applied and the target`s assets and liabilities must be measured at fair value (i.e., a forward merger). With this overview, I want to focus on the legal liability associated with disclosures in the PSPC transaction. Some practitioners and commentators – but not all – have argued that one of the advantages of PSPCs over traditional IPOs is the reduced risk of securities liability for the targets and the public company itself. They sometimes expressly refer to the safe harbor in the Private Securities Litigation Reform Act (PSLRA) for forward-looking statements and suggest or imply that the safe harbor applies to PSPC transactions but not to conventional IPOs. [7] According to these observers, this is why promoters, targets and others involved in a PSPC-De-feel feel comfortable presenting projections and other valuation documents that are not common in traditional IPO prospectuses. In July 2007, Pan-European Hotel Acquisition Company N.V. was SPAC`s first offering to be listed on Euronext Amsterdam, raising approximately €115 million. I-Bankers Securities was the underwriter of CRT Capital Group as lead underwriter. [7],[8] This listing on NYSE Euronext (Amsterdam) was followed by Liberty International Acquisition Company, which raised €600 million in January 2008.
Liberty is the third largest SPAC in the world and the largest outside the United States. The first German SPAC was Germany1 Acquisition Ltd., which raised $437.2 million on Euronext Amsterdam with Deutsche Bank and I-Bankers Securities as syndicated banks. [9] [3] Loyens & Loeff acted as legal counsel in the Netherlands[10] In line with these mythical claims, de-SPACs will experience a significant level of litigation from 2021 – even higher than traditional IPOs, where there are more disputes than normal for mature listed companies.