Phase One: IPO
The main assets of SPACs as they go through the IPO process are their management team, the management team’s investment strategy, and the SEC’s approval of the SPAC Form S-1 registration statement.
Phase Two: SPAC Business Combination
After the IPO, SPACs have the funds to purchase or merge with another company. The SPAC’s management team must find an attractive target and complete the merger or acquisition, typically within 18 to 24 months after the IPO. When the management team approaches potential acquisition targets, which are typically private companies, M&A representations and warranties insurance (RWI) comes into play. However, the management team must also consider and plan for D&O insurance coverage of the post-business combination entity.
Phase Three: SPAC Operations
At this point the combined company is up and running—and carrying with it all the attendant risks of an operating public company. As such, the company needs to be ready for public company scrutiny, which calls not only for ongoing compliance with all necessary regulations, but for a review and usually an upgrade of the company’s overall insurance coverage. This can mean upgrading everything from the company’s property insurance to the company’s cyber Liability insurance.