McDermott Comment | Desperate For Deals, America’s Spacs Target More Foreign Companies


Tom Whelan, partner at law firm McDermott Will & Emery, said:

“Non US based sellers are drawn to US SPACs by the seemingly higher premium they are prepared to pay for assets, as compared to other would be buyers.  This premium has been driven by the frothier deeper and more liquid US markets and investor appetite.  To date there have been very few non US SPAC equivalents.  Exiting to a US SPAC comes at a continuing cost of having to comply with US regulatory and reporting requirements which are more onerous than UK equivalents and the enhanced public scrutiny of being on a public market, as compared to private equity ownership.

Incentive plans for management in a US SPAC are also different with more LTIP and stock option arrangements that may be less tax efficient for UK based managers.  As a seller, it is unlikely that you will be able to exit in full when selling to a US SPAC due to lock up arrangements put in place at the time of the acquisition, and it will be important for sellers (including management) to understand the tax impact when it comes to exit the retained stock and ensure the proposed structure mitigates any adverse tax consequences that would otherwise erode the expected premium for the remaining retained stock.”