Special Purpose Acquisition Companies (SPACs) have become a popular tool in global capital markets, particularly in the U.S., where they offer private companies an alternative route to go public. While India’s regulatory framework does not yet fully support domestic SPAC listings, the discussion around them is gaining momentum—especially with SEBI exploring possibilities and GIFT City emerging as a potential hub.
Understanding how SPACs are formed and the timelines involved provides useful context for Indian investors, regulators, and companies that may consider this route in the future.
SPAC Formation: Step-by-Step
1. Formation and IPO (2–3 Months)
* Sponsors: Experienced sponsors (such as private equity managers, ex-bankers, or industry leaders) set up the SPAC and file a registration statement with regulators (e.g., the SEC in the U.S.).
* Capital: Funds raised through the IPO are placed in a trust account, making the SPAC a listed entity even before acquiring a business.
2. Target Search and Deal Negotiation (18–24 Months)
* Search Period: The SPAC team has 18–24 months to identify a suitable private company for acquisition.
* Due Diligence: Once a target is shortlisted, due diligence begins with a letter of intent (LOI) followed by negotiation of merger terms.
3. Merger Announcement and Regulatory Filings (2–5 Months)
* Announcement: The proposed merger is publicly announced once terms are finalized.
* PIPE Financing: In some cases, extra capital is raised through Private Investment in Public Equity (PIPE) to complete the deal.
* Regulatory Review: A detailed proxy statement or registration filing is submitted to regulators for approval—often the most time-consuming step.
4. Shareholder Vote and Merger Completion (1–2 Months)
*Vote: SPAC shareholders vote to approve or reject the merger. Investors also have the right to redeem their shares.
*De-SPAC Transaction: Upon approval, the merger is completed, and the private company becomes a publicly traded entity.
5. Post-Merger / Lockup Period (6–12 Months)
* Post-Merger Governance: The newly listed company must comply with standard financial reporting and governance requirements.
* Lockup: Sponsors and early investors are usually restricted from selling shares for 6–12 months post-merger to ensure stability.
Timeline Overview
| Phase | Typical Duration |
| SPAC Formation & IPO | 2–3 months |
| Target Search & Negotiation | 18–24 months |
| Merger Regulatory Process | 2–5 months |
| Shareholder Vote/Cloing | 1–2 months |
| Lockup Post-Merger | 6–12 months |
Each phase comes with specific legal, financial, and operational milestones, and failure to complete a merger within the 18–24 month period typically requires the SPAC to liquidate and return funds to investors.
👉 If no merger is completed within 18–24 months, the SPAC is liquidated, and funds are returned to investors.
India Context
* Current Status: Indian regulations under the Companies Act and SEBI’s listing rules require an operating business to launch an IPO, making domestic SPACs impractical for now.
* Indian Firms Overseas: Several Indian-origin companies (especially in tech, e-commerce, and renewable energy) have listed abroad via U.S.-based SPACs.
* Regulatory Discussions: SEBI and the Ministry of Corporate Affairs are studying frameworks to permit SPACs, particularly through GIFT City IFSC.
* Outlook: If India introduces a clear SPAC framework, it could become an attractive route for startups and high-growth firms to access capital markets quickly.
🔑 Key Takeaways
* A SPAC is a shell company formed to take a private company public via merger.
* The typical lifecycle runs 18–24 months, from IPO to acquisition and merger completion.
* Each stage—IPO, target search, regulatory filings, shareholder approval, and post-merger compliance—has distinct legal and financial milestones.
* In India, SPACs are not yet allowed domestically, but regulatory interest is growing.
* Future potential lies in GIFT City, which could act as a launch pad for India-focused SPACs.
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