Special purpose acquisition companies (SPACs) raised $28.5 billion from January through August 2020, more than double the amount raised in all of 2019 ($11.7 billion). SPAC sponsors are raising money across industries, with technology, financial, and healthcare sectors leading the way. For private equity and venture capital funds, SPACs offer an attractive opportunity to deploy capital to invest in promising target companies. Sellers benefit from a faster path to going public than a traditional IPO process and often a significantly higher price than would be generated by an IPO (which might be intentionally underpriced to attract enough first-day buyers). SPAC transactions also require less debt than a private equity sale.
As the use of SPACs continue to become more prevalent, both sponsors and sellers should consider the challenges inherent in executing a transaction. Sellers must prepare robust sell-side diligence materials within a short timeframe, as SPACs typically must complete a merger transaction within 18-24 months. Other materials required by the SEC to facilitate a SPAC’s filing include audited historical financial statements in compliance with public company standards. And once public, the company must comply with public company reporting and compliance requirements on an ongoing basis.
Our recent paper, 2020 Year of the SPAC, reports on what makes SPACs attractive, but also explains the intricacies of working with them.
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KPMG Deal Advisory distributes a wide selection of thought leadership that highlights the latest M&A issues and trends.
KPMG Deal Advisory distributes a wide selection of thought leadership that highlights the latest M&A issues and trends.
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