How a SPAC is built
A sponsor, usually an investment firm or a group of experienced executives, sets up a special purpose acquisition company and lists it on an exchange. Investors buy units, typically shares plus warrants, and the IPO money goes into a trust account. The sponsor receives founder shares for a small payment, which is its main economic reward if a deal is completed.
The SPAC then has a limited period, set in its documents and the exchange rules, to find a target and complete a business combination. If it fails, it returns the trust money to investors and is wound up. This deadline shapes the negotiation: as the date approaches, the sponsor has a strong incentive to close a deal.
The de-SPAC merger step by step
- The SPAC and the target sign a merger agreement that fixes the valuation and the exchange ratio.
- Additional investors often commit to buy shares at closing (a PIPE), which secures cash if many SPAC shareholders leave.
- The SPAC publishes a disclosure document about the target, in the US a proxy or registration statement reviewed by the SEC.
- SPAC shareholders vote on the deal and may redeem their shares for their part of the trust money.
- At closing the target merges into the SPAC or its subsidiary, and the combined company continues as a listed issuer.
For the target, the process can be shorter than a classic IPO because the listed shell already exists and the price is agreed in a negotiation, not in a bookbuilding. The audit, governance and internal control work is the same as for an IPO, and it must be ready by closing, since the company becomes public immediately.
IPO and de-SPAC compared
| Point | Classic IPO | Merger with a SPAC |
|---|---|---|
| Price set by | Bookbuilding in the market | Negotiation with the sponsor |
| Cash for the company | Known at pricing | Trust money minus redemptions, plus any PIPE |
| Dilution | New shares sold to investors, underwriting fee | Founder shares of the sponsor, warrants, fees |
| Market risk | Deal can be pulled before pricing | Shareholder vote and redemptions before closing |
| Readiness at listing | Full public company standards | Same standards, required by closing |
Risks for the owners of the target
- Redemptions: if many SPAC shareholders redeem, the company receives far less cash than the headline trust amount.
- Dilution from the sponsor's founder shares and warrants, which falls on all holders of the combined company.
- Price after closing: the market tests the negotiated valuation only once trading starts, and a weak start is hard to reverse.
- Disclosure and liability: forecasts and statements in the merger documents are scrutinised by regulators and investors.
- Lock-up: founders of the target and the sponsor are usually restricted from selling for a period after closing.
Rules in the US, the UAE and Saudi Arabia
The United States remains the main SPAC market. Renaissance Capital counts 158 SPAC IPOs in 2026 as of early November, more than any single sector, and FTI Consulting estimates that SPACs made up 40% of US IPOs by number in 2025, up from 27% in 2024. Nasdaq and NYSE both have dedicated listing rules for SPACs, covering the trust account, the deadline for a business combination and shareholder approval. In recent years the SEC has also tightened disclosure for de-SPAC transactions, bringing them closer to an IPO in terms of liability.
In the UAE, a SPAC framework was introduced by an SCA decision in 2022 and later updated; after the 2026 reform it sits under the CMA. ADX admitted SPACs soon after the framework appeared, although activity has been limited since. In Saudi Arabia, the CMA approved a SPAC framework for the Nomu parallel market in April 2026, which is limited to qualified investors. For a Gulf or Central Asian company, a US SPAC means US disclosure standards and SEC review, while a regional SPAC means a smaller pool of capital and fewer precedents.
When owners consider it
A SPAC merger is most often discussed when a company is ready for public reporting but the IPO window is closed, or when the business needs a sponsor with sector knowledge and access to a specific investor base. It is a negotiated transaction, so the quality of the sponsor and the terms of the promote matter as much as the market. Eurasia Consulting Group publishes this material as an educational overview.