The documents behind a de-SPAC
The business combination agreement sets out the merger mechanics, the consideration, the representations, and the conditions to closing. Around it sit sponsor support agreements, in which the sponsor commits to vote for the deal and sometimes agrees to forfeit or defer some of its shares, and subscription agreements for any outside financing meant to fund at closing. Lock-up and registration rights agreements govern when holders can sell once the deal is done. Any one of these documents can contain terms that quietly change the economics of the others. Reading them as a package, rather than one at a time, is usually where problems get caught. Exclusivity and termination provisions also deserve a close look, since they decide what happens if the deal stalls.
Redemptions and the cash question
Public SPAC shareholders generally have the right to redeem their shares for a portion of the trust account in connection with the business combination, and in many deals a large share of holders have done so. A minimum cash condition protects the target from closing without enough money, though sponsors may push to lower or waive it. Transaction expenses, deferred underwriting fees, and sponsor loans tend to come out of the same pool. Target companies should model what closing looks like at several redemption levels and decide in advance which outcomes they could live with.
Disclosure and who answers for it
SEC rules adopted in recent years expanded disclosure for SPAC transactions and, where a registration statement is used, generally treat the target company as a co-registrant. That means the target's management may bear liability for the disclosure, including projections, in ways a private company owner may not expect. Conflicts of interest involving the sponsor also draw attention from regulators and courts. Before you sign, we go through the full document set, separate the commitments that bind you at signing from those that bind only at closing, and discuss how projections and other disclosures will be prepared and checked.
