Learn how to structure a SPAC transaction step by step, from sponsor formation and IPO to merger closing. A practical guide for growth companies seeking SPAC financing services.
Structuring a SPAC transaction requires completing six core phases: sponsor formation, IPO execution, target identification, due diligence, merger negotiation, and closing. Each phase carries distinct regulatory, financial, and strategic requirements that growth companies must address with precision. Understanding this process end-to-end is the difference between a successful public listing and a costly, avoidable failure.
SPAC financing services have become one of the most actively used capital access mechanisms for growth-stage businesses in North America, with the US SPAC market raising over $162 billion across 613 deals in 2021 alone, according to the SPAC Research database. While deal volume has normalised since that peak, the structural advantages of SPAC transactions remain compelling for businesses targeting the US and Canadian capital markets in 2026.
This guide breaks down each phase of the SPAC transaction process and explains exactly what growth companies need to prepare at every stage.
The transaction begins before any target company is involved. A SPAC sponsor — typically a private equity firm, investment group, or experienced operator — establishes a blank-check shell company with the express purpose of acquiring a private business and taking it public.
The sponsor contributes founder shares, known as the promote, in exchange for a 20% equity stake in the SPAC at nominal cost. This promote structure aligns sponsor incentives with transaction success, though it also creates dilution that target companies must account for during valuation negotiations.
For growth companies evaluating SPAC financing services, the sponsor's background is non-negotiable. A sponsor with sector expertise, institutional investor relationships, and cross-border deal experience — particularly across US and Canadian capital markets — dramatically increases the probability of a successful close. Sun Point Capital's global network spanning Hong Kong, Dubai, and North America positions growth companies to access sponsors whose capital relationships match their target investor base.
Once the SPAC structure is formalised, the sponsor conducts an IPO — typically on NASDAQ or the NYSE — issuing units that combine shares and warrants. Investors subscribe to these units at a standard price of $10 per unit, and the gross proceeds are placed into an interest-bearing trust account.
The trust account is the financial engine of the entire transaction. These funds are held in escrow and can only be released upon completion of an approved acquisition or returned to public shareholders if no deal closes within the specified window — typically 18 to 24 months.
Regulatory compliance during the IPO phase falls under the oversight of the US Securities and Exchange Commission (SEC), which requires full disclosure of the SPAC's investment thesis, risk factors, and sponsor compensation structure in the S-1 registration statement.
This is the phase where growth companies enter the process. SPAC sponsors actively source acquisition targets through their proprietary networks, industry relationships, and advisory partners. For businesses operating in high-growth sectors — technology, healthcare, clean energy, and financial services — SPAC acquisition interest is strongest when the company demonstrates clear revenue traction, scalable operations, and a credible path to public-market valuations.
A well-prepared target company should enter this phase with a clean corporate structure, audited financials (PCAOB-compliant for US listings), a compelling equity story, and management bandwidth to handle the rigors of a public company transition.
For businesses exploring multiple capital access pathways, it is worth understanding how SPAC transactions compare to CPC and RTO structures. Our article on CPC vs SPAC differences provides a detailed breakdown of which vehicle suits different business profiles, particularly for companies operating in or connected to Canadian markets.
Once a sponsor identifies a preferred target, the parties execute a non-binding Letter of Intent (LOI) that outlines the proposed transaction structure, indicative valuation, and deal timeline. This is one of the most consequential phases of the entire process.
Valuation in a SPAC transaction is negotiated — not determined by market forces as in a traditional IPO. The target company's founders and the SPAC sponsor agree on an enterprise value, which forms the basis of the pro forma share price and ownership split. The sponsor's 20% promote, combined with PIPE financing commitments and potential shareholder redemptions, all affect the net cash received at closing.
PIPE financing (Private Investment in Public Equity) plays a critical role here. SPACs frequently secure PIPE commitments from institutional investors simultaneously with the merger agreement to supplement trust proceeds and signal transaction credibility to the broader market. According to data published by SPAC Insider, PIPE deals accompanied over 70% of successful SPAC mergers between 2020 and 2023.
A SPAC transaction is not simply a backdoor to public markets — it is a negotiated capital event with real structural trade-offs. Growth companies that enter the process understanding dilution mechanics, redemption risk, and PIPE dynamics are the ones that close successfully with the capital they actually need.
Following LOI execution, both parties enter a formal due diligence period. The SPAC's legal and financial advisors conduct comprehensive reviews of the target's financials, intellectual property, material contracts, litigation exposure, and management team credentials. Simultaneously, the target company's advisors review the SPAC's trust account integrity, sponsor conflicts of interest, and shareholder composition.
Upon completion of due diligence, the parties file a definitive merger proxy — or Form S-4 registration statement — with the SEC. This document discloses the full transaction terms, pro forma financials, risk factors, and the combined company's business plan. The SEC review process typically takes 60 to 90 days, during which the agency may issue comment letters requiring supplemental disclosure.
For businesses based outside the United States — including those in Hong Kong or Dubai seeking access to US capital markets — this regulatory phase requires experienced cross-border advisory support. Sun Point Capital's comprehensive solutions covering both financing and strategic advisory services ensure that international companies meet SEC requirements without sacrificing deal timeline.
The final phase requires SPAC public shareholders to vote on the proposed acquisition. Shareholders who disapprove of the deal or prefer to recover their investment may redeem their shares for their pro rata share of the trust — typically $10 plus accrued interest. High redemption rates can significantly reduce the net capital delivered to the target company at closing.
Successful sponsors manage redemption risk through institutional roadshows, PIPE anchor commitments, and compelling equity narrative presentations to existing shareholders. The shareholder vote is typically held 20 to 30 days after the proxy becomes effective.
Upon shareholder approval, the SPAC and target company merge into a single publicly traded entity. The combined company begins trading under a new ticker symbol, and the target's founders receive their negotiated equity stake in the new public company.
Q: How long does a SPAC transaction take from LOI to closing?
A SPAC transaction from signed LOI to closing takes between six and twelve months in most cases. The timeline is driven by SEC review duration, due diligence complexity, and the time required to secure PIPE commitments. Companies with clean financials and experienced advisory teams consistently close at the lower end of this range.
Q: What are the primary costs a target company incurs in a SPAC transaction?
Target companies typically incur legal fees, accounting costs for PCAOB-compliant audit preparation, financial advisory fees, and D&O insurance premiums. Total transaction costs for a mid-market SPAC deal commonly range from $3 million to $8 million USD, depending on deal complexity and the number of jurisdictions involved.
Q: Can companies outside the United States use SPAC financing services to access US capital markets?
Yes. International companies — including those headquartered in Canada, Hong Kong, or Dubai — regularly access US capital markets through SPAC transactions. The process requires additional cross-border structuring, potential reorganisation into a US-domiciled holding company, and compliance with both US SEC requirements and home-country regulations. Working with an advisor who maintains active relationships across these markets is essential to managing this complexity efficiently.
Businesses that enter the SPAC process unprepared face predictable outcomes: extended timelines, reduced valuations, and elevated redemption rates. The companies that close successfully share four common attributes.
First, they have PCAOB-compliant audited financials covering at least two fiscal years. Second, they can articulate a clear, differentiated equity story that institutional investors find credible in a public-market context. Third, their management team has the capacity and capability to operate under public company governance requirements. Fourth, they engage experienced SPAC financing services advisors before — not after — a sponsor approaches them.
The structural advantage of a SPAC transaction is not speed for its own sake. It is the ability for a growth company to negotiate its valuation directly with a motivated acquirer, access institutional capital, and achieve a public listing on a defined timeline with defined economics — outcomes that a traditional IPO process rarely guarantees.
Tailored capital access strategies, including SPACs, CPCs, and RTOs, serve different business profiles at different stages. Sun Point Capital works with growth companies across North America, Hong Kong, and Dubai to identify which structure maximises value and then executes that transaction with precision.
For businesses considering the full range of capital access mechanisms available beyond SPAC, reviewing the strategic landscape through our guide on how to access capital markets provides essential context for making an informed decision.
No phase of a SPAC transaction should be navigated without experienced advisory support. From sponsor selection and LOI negotiation to SEC filing management and shareholder communication, the quality of advisory services directly determines the quality of the outcome.
Sun Point Capital delivers comprehensive solutions covering both financing execution and strategic advisory services across the full SPAC transaction lifecycle. Our global network connects businesses in Hong Kong, Dubai, and North America to institutional capital markets in the US and Canada — ensuring that growth companies access the right capital, from the right sources, at the right valuation.
The SPAC transaction structure is well-defined. The variable is execution. Businesses that treat it as a capital strategy — not a shortcut — are the ones that emerge as credible, well-capitalised public companies positioned for sustained growth.
Last Reviewed: June 2026