b'Mergers & Acquisitions | SPACsimportant is that in connection with a businessconsisting of one share of Class A common stock combination, the SPAC is allowed, and may even beand one-third of a warrant. The SPAC was spon-required, to disclose financial projections for thesored by Cohen & Company Inc., a manager of target whereas in a traditional IPO, financial projec- fixed income assets with extensive experience tions are almost never shared with investors. Thus,funding small and medium-sizedinsurance compa-for an early stage or high growth company, goingnies in the US, Bermuda and Europe, and Cantor public through combining with a SPAC will allow theFitzgerald& Co., the IPO underwriter. According company to more fully tell its story and get theto the SPACs IPO prospectus, the SPAC intends to highest possible valuation. This benefit may be lessconcentrate its efforts on identifying businesses important to many traditional insurance companiesproviding insurance or insurance-related services, as traditional insurance companies are generallywith particular emphasis on insurance distribution evaluated based more on their balance sheets ratherbusinesses, regulated insurance or reinsurance than multiples of projected earnings or EBITDA.businesses and insurance-related technology Of course, there are disadvantages to going publicbusinesses. The prospectus defined the insurance by combining with a SPAC. In a typical SPACsector (or insurance-related services and compa-combination, 20% of the value of the combinednies) to include, but not be limited to:company is typically allocated to the sponsor whichInsurance distribution companies, including retail dilutes the targets stockholders. For this reason, itagents, insurance brokers or managing general is not uncommon for the target to negotiate withagencies;the sponsor to forgo some of its economics eitherInsurance and/or reinsurance carriers, in any sector by giving up some of its shares or warrants.including P&C, life and health;Potential redemptions create uncertainty as to the final amount of cash the SPAC will have at closing,Insurance runoff managers;although this uncertainty can be mitigated throughService providers, including claims or cost man-the inclusion of a minimum cash requirement foragement, business processing, premium payment the SPAC in the business combination agreementfacilitation, data and technology providers and or through the issuance by the SPAC of a PIPE.asset managers; andWhile the SPAC and the target can agree upon aInsurtech companies, including those focused on valuation for the business, the market can disagreeusing technology to maximize savings and effi-and the shares of the SPAC can trade below the $10ciency, launch growth opportunities and innovate price which could result in SPAC stockholdersnew risk selection processes.voting against the business combination or a highAs discussed below, in one of the fastest IPO to percentage seeking redemption of their shares.de-sPACing announcements ever, in November Finally, the costs incurred in connection with a2020, the SPAC announced a business combination SPAC business combination are generally muchwith Metromile.higher than traditional IPO.INSU Acquisition Corp. III IPO. In December 2020, SPAC Transactions in 2020 INSU III completed a $250 million (inclusive of the INSU Acquisition Corp. II IPO. In Septemberportion of the over-allotment option exercised) IPO 2020, INSU II (INSU Acquisition Corp. having goneselling units consisting of one share of Class A public in 2019) completed a $230 million (inclusivecommon stock and one-third of a warrant. INSU III of the over-allotment option) IPO selling unitswas also sponsored by Cohen & Company Inc. and had the same business strategy as INSU II.MAYER BROWN 23'