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M&A monitor

SPACs go global

With so many US SPACs in the market, it’s no surprise they’re broadening their horizons in search of deals. 

In the first three months of 2021, US SPACs announced foreign acquisitions worth a staggering $48.4bn – more than in the previous 20 years combined. Of the 191 business combinations announced by US SPACs since the start of 2020, almost one in five (17 percent) involved a target outside the United States. Almost half of those (14 of 32) have come since January.

For NYSE- or Nasdaq-listed SPACs merging with overseas businesses, the US regulatory process is easier to negotiate if the target is a “foreign private issuer”. To qualify, at least half the company’s shares must be held by non-US residents – or alternatively, most of its assets, directors, officers and the administration of its business must be outside the United States.

For the target, the primary issue (beyond the long-term compliance considerations of becoming a US public company) is that the SEC registration process and proxy statement needed to close the deal require financial statements prepared using US GAAP (or IFRS/IASB accounting standards). In addition, those financials must be independently audited in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), the US accounting regulator. If the target company has made one or more significant acquisitions in the latest year, it also needs to provide audited financials for these deals for inclusion in the proxy or registration statement. Preparing them (or attempting to negotiate waivers with the SEC if they can’t be produced) can take weeks or even months, and if the SPAC is nearing the end of its two-year clock, it may not have time to wait.

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