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Guide to D&O Insurance for De-SPAC Transactions

March 17, 2021

/SPACs/Mergers & Acquisitions/Management Liability/D&O

Are you a successful private company being courted by a SPAC? This alternative route to going public is picking up serious steam; no surprise given that the number of SPACs in Q1 2021 already surpassed the total number of SPACs in 2020 (by nearly twice the amount). All of these SPACs are looking for companies to acquire.

If you choose to go public through a de-SPAC transaction, one of the many things you’ll need to plan for is obtaining D&O insurance suitable for a publicly traded company.

The process of obtaining D&O insurance for a new public company is both complicated and expensive, whether it is through an IPO or a de-SPAC transaction. That is why you need to work with a specialized broker who understands the nuances and can guide you through the process.

The 2021 edition of Woodruff Sawyer’s Guide to D&O Insurance for De-SPAC Transactions will help you map the D&O insurance process to your de-SPAC timeline in a way that will optimize your outcome.

D&O De-SPAC Guide 2021

D&O Insurance Process for a De-SPAC Transaction

To help you think about the D&O insurance process for a de-SPAC transaction, we’ve divided the timeline into various phases: preparation, launch, implementation, and ongoing support.

De-SPAC Going Public Milestones

The Preparation Phase

This phase is all about developing a strategy for risk mitigation and your D&O insurance, not to mention your lines of commercial insurance. You are gearing up to be ready for public company scrutiny, so it is, of course, not just about insurance. In this phase, you will want to look at corporate governance practices to help mitigate director and officer litigation risk. One of these exercises includes giving consideration to things like federal forum provisions to help you avoid duplicative state court litigation as a public company.

The Launch Phase

This step is all about refining your decisions around how much insurance to purchase, negotiating the coverage terms, and socializing this decision with your board. It is not just about presenting D&O policy information, however. Most boards want to be educated about the evolving threat landscape they are walking into as a new public company. As part of the launch phase, you will want to schedule compliance training for employees. Being a public company employee can be very different, and you want to be sure everyone understands things like the rules against insider trading.

The Implementation Phase

Here is where all aspects of the D&O insurance program will be finalized. Things like executing warranties, addressing subjectivities, securing “look back” coverage, and binding the policy all happen in this phase.

The Support Phase

Placing D&O insurance is not a one-and-done activity (or at least it shouldn’t be). There are many challenges that arise as a newly public company. A good broker can provide critical support to a new public company. This might take the form of ongoing advisory services, board training, D&O market updates, and, unfortunately in some cases, claims advocacy.

Next Steps

Woodruff Sawyer’s Guide to D&O Insurance for De-SPAC Transactions will help you understand the critical milestones on the path to an optimized D&O insurance program as you undertake your de-SPAC business combination.

Regardless of how you go public, whether it is a traditional IPO or a de-SPAC transaction, the goal from an insurance perspective is to have a robust D&O insurance program with appropriate limits and very broad terms and conditions that provide coverage for litigation that may arise after the company goes public.

D&O De-SPAC Guide 2021

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn

Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn