Advantages of SPACs Over Traditional IPOs
Key Transaction Terms and Financing
The SPAC and the Target will enter into a letter of intent or term sheet and begin drafting and
negotiating a merger agreement. The terms will include the consideration to be paid to the
sellers of the Target, including the mix of cash and stock of the surviving company.
The terms will often include a Minimum Cash Condition. This is a requirement that the SPAC
have a minimum amount of cash available at closing, which cash is obtained from the proceeds
in the trust account (net of Redemptions) and proceeds of a PIPE transaction, the solicitation
and negotiation for which occurs in parallel with the merger agreement.
The terms also include restrictions on transfers of the founder shares and shares received by the
sellers; registration rights for the Sponsor, sellers, and PIPE investors; the composition of the
post closing board of directors; and other matters.
Morgan Lewis
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