Many of our most successful freelance consultants come to Beech Valley ready for new opportunities; and, frankly, a change of pace without the rigid expectations that come with traditional roles. Finally, a chance to be in control and try new things!
Freelancing offers a safe way to dive into rare and unusual specializations, diversifying your existing skillset. Taking on projects that offer a unique experience insulates your career from income inconsistency and gig gaps as you become a subject matter expert in a hot or up-and-coming area. Firms love it and will be requesting you by name!
That’s why if you haven’t heard about SPAC IPOs yet, it’s time to learn more about this specialization and if it might complement your existing skills.
The IPO market is projected to boom in 2021 and beyond, with many companies choosing to go public with the help of a publicly-held investment vehicle called a special-purpose acquisition company, or SPAC. First, we will discuss the SPAC concept, and then we will share which skills you may already have that our clients ask for when hiring SPAC consultants.
What is a special-purpose acquisition entity (SPAC)?
A SPAC is a publicly-traded shell company created by investors, called sponsors. Once listed, the clock starts ticking. The SPAC has a finite period — typically 18-24 months — to find a private company to acquire. This merger with the public shell will bring the private company public. If a merger can’t be completed within the time period, the SPAC must liquidate. Some people refer to SPACs as “blank check” companies. And the sums of money are staggering. In January 2021 alone, $26 billion was invested in SPACs with the expectation that 2021 will outdo the $83 billion raised in 2020.
SPAC vs Traditional IPO
SPAC mergers are quicker, cheaper, and less risky in a volatile market — especially when it comes to the IPO price (which is a negotiated price). The average SPAC merger only takes 3-6 months. As an investment vehicle, it offers private companies earlier access to the market. Still, it means that the private target company must get its financials ready for the SEC filings really fast. The target company must also make sure its internal controls are set up in accordance with best practices on an expedited timeline. (Hint: This is where Beech Valley freelancers come in.)
SPAC sponsors benefit from founder shares (usually a 20% stake) or warrants that allow them to purchase or receive new shares. The warrants are part of what make SPACs such a good investment for sponsors.
A traditional IPO usually takes over a year to go through the underwriting process and begin issuing new shares on a public exchange. It’s a tried and true process, which offers much more control. The due diligence is very extensive, and companies have longer to get their ducks in a row for the SEC. In 2020, of the over 400 companies to go public, about 40% were traditional IPO. The remainder used a SPAC merger. A traditional IPO is less dilutive in choosing between the two since there are no SPAC warrants to factor in.
Some noteworthy SPAC mergers include DraftKings, Virgin Galactic, Clarivate Analytics, and several healthcare-related companies.
Why is it popular in 2021?
Investors like SPACs since there is a big upside if you get involved pre-acquisition and a merger is successful. The average return for SPAC is 9.3% per year. Experts compare it to a “default-free convertible bond” if it is able to locate a target and complete an attractive merger. Because it’s so lucrative, there are over 200 SPACs shopping for target companies right now in 2021.
Opportunities for specialized freelancers
Consulting and advisory services have the ability to open doors, both in terms of potential compensation rate and income consistency (i.e., say goodbye to busy season). But how do you gain experience? What if the more traditional assurance services are all you’ve done before? SPAC consulting can be a great on-ramp. It is an accessible way for auditors or financial reporting professionals to gain experience with mergers and acquisitions (M&A).
The good news is that due to the sheer volume and level of investor interest, there are lots of opportunities for skilled professionals. What’s more enticing is that these roles often come with appealing compensation rates due to their urgent nature and the perception of requiring more specialized skills. It’s worth considering for freelancers who would like to take the reins on their own career progression and increase their long-term market value, especially if it’s due time for a change of pace and to say farewell to SALY (same as last year).
What skills does a SPAC consultant need?
Even if you’ve never done a SPAC engagement before, many freelancers already have skills that would make them a desirable SPAC consultant.
Some of the transferable skills that would help you easily add this expertise to your resume include:
- Sarbanes-Oxley 404 compliance testing and readiness analysis
- SEC reporting
- Technical accounting (revenue recognition ASC 606, leases)
- Prior Big 4 experience
- M&A
Beech Valley is currently filling roles for consultants to assist our clients with SPAC engagements.