b'Mergers & Acquisitions SPACs2020 has been described as the Year of the SPAC. In 2020, according to SPAC Insider, 248 special purpose acquisition corporations (SPACs) completed their initial public offerings (IPOs), raising over $83 billion. Perhaps that award was premature as in January 2021, over 80 SPACs completed IPOs raising over $23 billion. The recent rise of the SPAC has had a profound effect on the US IPO market and, to a lesser extent, the US IPO market for insurance companies.What is a SPAC?A SPAC is a newly formed company with no assets or operations, also known as a blank check company. The SPAC may be sponsored or formed by a company (e.g., a private equity firm) or a group of individuals. The SPAC completes an IPO of common stock and, typically, warrants, with the stated business purpose of completing a business combination (commonly referred to as a de-SPACing) using the proceeds of the IPO, the proceeds of further capital raises and shares of its common stock. The SPACs business plan may specify a particular industry or geographic focus. In 2020, three SPACs completed IPOs with a stated focus on the insurance (including insurtech) industry. Each of INSU Acquisition Corp. II (INSU II), INSU Acquisition Corp. III (INSU III) and Delwinds Insurance Acquisition Corp. (Delwinds) completed their IPOs in the last half of 2020. FG New America Acquisition Corporation is focusing on insurance and financial services. In January 2021, Kairos Acquisition Corp., which is focused on the insurance industry, completed its IPO.Typically, the SPAC will offer to investors in its IPO units comprised of one share of stock and a warrant to acquire another shares, or fraction of a share, of common stock. The cost of the unit is typically $10 per unit and the exercise price of the warrants is typically 115% of the unit price, or $11.50 per full share. The proceeds of the IPO (less the underwriting discount paid in the IPO) are placed into a trust fund that can only be used to consummate a business combi-nation or, if a business combination is not completed within a specified period of time (typically 18-24 months) to redeem public shareholders.The sponsor(s) of the SPAC typically receive for nominal consideration a special class of shares (commonly referred to as founders shares) that will convert into 20% of the post-business combination companys shares. In addition, the sponsor(s) typically purchase warrants (typically equal to about 2% of the amount to be raised in the IPO) to fund the IPO and operating expenses of the SPAC.MAYER BROWN 21'