Before a private company signs a letter of intent with a SPAC investor, business leaders should ensure their executive compensation plans are in good standing and commit to a deeper governance audit once the deal is signed.
Traditional IPOs give private firms months (if not years) to prepare for the governance requirements of being a public company — including adjusting compensation plans and hiring independent directors, for example. The explosion of special purpose acquisition companies (popularly known as SPACs) in the market highlights one of the things “reverse merger” deals don’t have — time to prepare.
A shorter timeframe to prepare to be a public company forces the target company to act quickly, ensuring compensation plans meet the evolving needs of the firm and that governance processes are addressed in connection with the transaction (commonly known as the “de-SPAC”).
In this article, we’ll explore the biggest compensation and governance issues private companies should address and then plan for when thinking about going public through the SPAC process.