US markets have seen a surge in the number of SPACs. While some elements of the process are essentially the same for each SPAC, every transaction brings a unique set of challenges and risks.
It is important that SPACs understand the risks they face throughout the SPAC lifecycle, from IPO to de-SPAC and beyond.
One consideration is how to effectively protect the personal assets of the SPAC’s directors and officers. It is also important for you to have a deep understanding of the potential liabilities and risks associated with raising capital, pursuing a target, and completing the business combination.
Through their extensive experience and industry knowledge, Marsh SPAC risk specialists are positioned to help SPACs identify risks, customise programs, and secure insurance policies tailored to your exposures.
Directors and officers liability (D&O) insurance should be a consideration for all SPACS. The directors and officers of SPACs face unique exposures and a direct risk to their personal assets as the funds held in SPAC trusts cannot be used to indemnify them. In the absence of a properly crafted insurance program, individuals could be forced to use their personal finances to cover the defence costs and potential settlements resulting from a claim.
A well-designed insurance program can protect the personal assets of directors and officers when a SPAC is unable to indemnify them. In building a D&O policy specifically for a SPAC, directors and officers should seek to obtain:
The reverse merger process that allows a private company to become a listed entity through a SPAC is typically simpler, shorter, less expensive, and less dependent on market conditions than a traditional IPO. But there can be unintended consequences and sources of liability for both the SPAC and its target, including:
