In a SPAC Merger Transaction The fair value of equity consideration issued in a merger involving a public company is generally calculated as the product of the quoted price for the individual equity instrument times the quantity issued (commonly referred to a “P times Q”). However, if the merger involves a special purpose acquisition company (SPAC), determining “P” can be subjective and may result in different interpretations of U.S. GAAP fair value between the valuation specialist and the parties involved in the deal. Introduction The fair value of equity consideration issued in a merger involving a public company is generally…
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Buyer and Seller Beware When a privately-held acquirer uses its stock to partly purchase a company, it is imperative that both the acquirer and the target in a transaction have support for, and a level of comfort with, the value assigned to the acquirer’s shares if they are being issued as part of the deal. It is especially important for the seller to conduct its own due diligence to better assess its risk exposure and understand the fair value of intangible assets. This article discusses procedures that sellers and buyers should consider before finalizing the terms. We are all familiar…