Agreement and Plan of Merger
(De-SPAC) (Neutral) (DE)

Summary

This template Agreement and Plan of Merger (De-SPAC) is for use in a reverse triangular merger between a publicly-held special purpose acquisition company (SPAC) and a private company target in which all of the consideration will be common stock of the SPAC acquirer. This template includes practical guidance, drafting notes, and alternate and optional clauses. A SPAC is a public shell company that raises funds through an initial public offering (IPO) and uses the proceeds to acquire a private company. This business combination is commonly referred to as a de-SPAC transaction. Click here to see recent examples of publicly filed de-SPAC merger agreements in Market Standards—M&A. De-SPAC transactions must be consummated within a designated time frame, usually between 18 and 24 months from the date of pricing the IPO. If the SPAC is unable to consummate a business combination in the designated time frame, the SPAC must either seek approval from stockholders for an extension or liquidate and return the funds raised in the IPO to investors, which funds are held in an interest-bearing trust account. De-SPAC transactions are commonly structured as reverse triangular mergers, in which a newly formed subsidiary of the acquiring party merges with and into the target. However, de-SPAC transactions can be structured as any type of business combination that results in the SPAC's acquisition of a private target company or its business. Below is an example of the post-merger organization following a reverse triangular de-SPAC merger. The merger itself is governed by applicable state law and typically involves the filing of a certificate of merger with the relevant secretary of state (or equivalent). A merger agreement is the operative agreement governing a statutory merger. The agreement addresses merger mechanics, merger consideration, and the post-merger surviving entity (including its charter, by-laws, and management). In order to address business and risk allocation issues, the merger agreement also includes representations and warranties, covenants, indemnification (or in the alternative, a non-survival provision), and termination provisions. Important ancillary documents are typically included as exhibits to merger agreements, including voting agreements, forms of charter and bylaws for the surviving entity that will become effective when the merger is consummated, and other ancillary documents that might be necessary to consummate the transaction. Delaware law requires merging Delaware entities to include the following in a merger agreement: 1. the terms and conditions of the merger; 2. the mode of carrying the merger into effect; 3. any amendments to be made to the charter of the surviving corporation; 4. the manner of cancelling the shares of the target and acquirer companies, or of converting them into shares of the surviving corporation; and 5. any other material terms deemed desirable to include (see 8 Del. C. § 251(b)). The benefits of a merger are much the same as a stock purchase in that effectively the buyer is responsible for all of the assets and liabilities of the merging entity. Fewer third party consents and transfer approvals are required but "change of control" provisions may still be triggered. There is no need for the buyer to get 100% of the stockholder vote to control the company, as once it has complied with the state law and company voting requirements, the buyer acquires and controls the company. Drawbacks to a merger are similar to a stock purchase transaction in that the acquiring company cannot pick and choose the assets and liabilities it acquires, and the acquisition is subject to the approval by the requisite percentage of stockholders. Tax treatment for the transaction will depend on the merger structure selected. The regulatory schemes that are addressed in this template are those that are generally applicable without regard to industry, such as antitrust, tax, ERISA, environmental, anti-corruption, and federal securities regulation. This template is generally neutral. Related Content • Private Merger Agreement Basics • Private Merger Transaction Resource Kit • Merger Transactions Training Presentation • Mergers (DE Corporation) • Asset Purchase, Stock Purchase, and Merger Structures: Benefits and Drawbacks • Market Trends 2022: De-SPAC Transactions • Market Trends 2021/2022: De-SPAC Transaction Terminations • De-SPAC Transaction Tracker: 2023 • Special Purpose Acquisition Companies • SPAC and De-SPAC Transactions: U.S. Tax Considerations • PIPE Transactions • Top 10 Practice Tips: PIPE Transactions by SPACs Templates • Agreement and Plan of Merger (Private Target) (Pro-Seller) (DE) • Agreement and Plan of Merger (Public Target, One Step, Cash) (Pro-Buyer) (DE) • Agreement and Plan of Merger (Public Target, One Step, Stock for Stock) (Pro-Buyer) (DE) To compare selected state laws, see Corporation: Mergers and Corporation: Appraisal Rights in the Corporate and M&A State Law Comparison Tool. For recent examples of publicly filed de-SPAC transaction agreements in Market Standards—M&A, click here. Market Standards enables users to search, compare, and analyze its comprehensive database of transactions using over 150 detailed data points to filter search results. You can customize any search to your needs by adding filters or modifying the search criteria.