Helping a PE Firm Avoid Litigation and Mitigate People Risk

A private equity firm decided to form a SPAC and established a board of directors to oversee any potential acquisition candidates. To ensure that board members’ backgrounds were free of red flags and disclosure materials were accurate, they hired BDO.

Client Situation & Challenge

As a SPAC sponsor, the PE firm was required to disclose risks to investors in its prospectus and to undergo a suitability analysis. With no past performance or operating history to point to, the qualifications of individuals on the SPAC board—and any risks they posed—held significant weight.

BDO Solution

BDO performed extensive due diligence on board executives. Research included a thorough investigation of employment history, industry reputation, past IPO involvement, corporate affiliations and investment holdings.

During that research, BDO uncovered several reputational issues as well as conflicts of interest for a board executive that were not disclosed in the SPAC prospectus. BDO provided investigation findings and analysis in an in-depth report to help them evaluate and address these risks.

Client Benefit & Result

The client ultimately decided to keep the executive on the board, but made significant adjustments to the SPAC prospectus, including the addition of new disclosures. As a result, the firm was able to successfully list its SPAC and met with no legal challenges.

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