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Insurance Coverage for SPACs in 2020: A Guide to Getting it Right

January 22, 2020

Management Liability/D&O

In 2019, there were 59 SPAC IPO transactions—a record number, up from 48 in 2018. SPACs (special-purpose acquisition companies) continue to become a popular alternative and viable option for taking a company public.

Chart showing steady growth of SPAC IPO transactions since 2009, with 34 in 2017, 46 in 2018, and 59 in 2019

Source: SPACInsider

<<<Get Instant Access to the Guide to Insurance for SPACs now>>>

As a reminder, a special purpose acquisition company (SPAC) raises capital in an IPO with the intention to acquire or merge with a private operating company and take it public.

Indeed, SPACs are special companies with special needs, notably when it comes to placing D&O insurance programs that cover management liability, and M&A representations and warranties insurance that facilitate the business combination.

Given that SPACs are not operating companies, their IPOs see far less litigation than typical IPO companies. However, lawsuitsusually alleging material misstatements and omissions in the IPO registration statementagainst a SPAC’s management team and its directors are still possible.

In addition, M&A reps and warranties insurance, judiciously used in the SPAC’s business combination, can provide a crucial safety net to the buyer if the seller’s representations and warranties turn out to be flawed.

This type of coverage also allows SPACs to position themselves as competitive bidders in a strong, private equity-led seller’s market.

Knowing how to mitigate the specific risks that SPACs present and when to begin discussions with an insurance broker could mean the difference between a successful SPAC and a flop.

In Woodruff Sawyer’s Guide to Insurance for SPACs, we discuss the hurdles SPACs face as they progress from their IPO stage to their business combination stage.

<<<Get Instant Access to the Guide to Insurance for SPACs now>>>

At every stage, SPACs can benefit from a well-planned insurance strategy. Our guide provides tips on available insurance products and the best timing within the SPAC’s life cycle to consider and implement them.

For much more on how to think about insurance during a SPAC’s life cycle, the latest developments in D&O insurance and SPACs, and the use of M&A reps and warranties insurance, explore your copy of the Guide to Insurance for SPACs now.

Cover image of Woodruff Sawyer's Guide to Insurance for SPACs

 

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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