With all the craziness going on in the big 4 accounting firms right now, I wanted to highlight an area of growth. We’ve been talking a lot about layoffs and downsizing, but overall the equity markets in the United States have done really well.
An area that is heating up even more is SPACs. SPAC stands for special purpose acquisition company. These are IPOs where the money raised in the IPO is used for an acquisition of a target entity. It is an alternative to an IPO to raise capital. It is also an alternative to using debt. Private equity companies and hedge funds have been using these vehicles to target companies that they want to acquire and take public.
According to various sources, there have been about 81 SPAC IPOs in 2020 to date that have raised more than 33.1 billion. That is almost triple of the amount raised in 2019. All this during COVID 19. Crazy right.
Why does this matter for big 4 accounting firms? Well it matters because it means a lot more accounting and consulting work for them. It is also an area that you might want to look in for your career. It appears that the big 4 are classifying their guidance under the audit section of their websites, but you could specialize in this field under tax, audit or advisory. You should focus on getting a job in the mergers and acquisitions industry of the big 4 firm if you are interested in this area.
There is a harvard business school article that provides an overview of the SPAC timeline which I thought was the most helpful.
PwC also has an article on it that is pretty helpful, but I think the HBR article is more useful.
Deloitte’s website is also a good resource for people looking to learn more about how these investment vehicles impact the big 4.
SPACs are a great way for the big 4 to earn money during this downtime in the economy. They can make money consulting the acquirer on which target to acquire. They can consult companies on how to be targets of SPACs. Then they can help with all the regulatory requirements that come with taking a company public.
As part of the SPAC process, SPAC’s must prepare a proxy statement where they let shareholder’s vote on on whether or not to consummate the transaction.
They might also have to prepare a combined proxy statement and registration statement for any additional shares that are issued as a result of the acquisition.
Additionally, something called a Super 8-k must be filed no later than 4 business days after the close of the transaction. This super 8-k must detail the completion of the transaction. The Super 8-k must also include all information that would be required if the target was filing a form 10.
Proforma financial information must also be prepared for the transaction along with all the proper accounting requirements. The targets auditing firm will have to do a lot more work than they are used to.
Previously many of these SPACs were used in the energy sector, but more and more are being used in the technology sector. This is a growing niche in the big 4 accounting firms so make sure to look into it if you are looking for a growing field.