INVESTOR DUE DILIGENCE
It’s always useful to spend some time evaluating a SPAC’s management team. In fact I would argue that quality of the management team is the most critical factor in any deal.
So … read through the track record and bios of the SPAC’s executive board roster and ask the following questions:
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Do they have a solid M&A history?
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Do they have a history raising venture capital?
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Do they have long experience managing public companies?
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What is their background and performance in the area in which the SPAC is searching for a business combination?
It is also very worthwhile to review any history a SPAC’s sponsor has with previous SPAC transactions, in particular the underwriter(s) ‘on the cover’ and securities counsel. You can gain valuable insight into their ability to source and finance a credible deal in the SPAC format.
Some serial SPAC sponsors have a history of acquiring successful companies that continue to prosper over time, while others have a history of finding deals that barely secure enough financing to close and whose common stock has cratered almost immediately after closing.
Get the ‘right’ answer to these fundamental questions and your choice – of whom to back – can be made with increased confidence.
2021 saw a significant increase in the popularity of special purpose acquisition companies (SPACs) as a way to bring private companies public. It also made some well-known private equity managers accessible to public investors. Looking back, we see that 2021 saw 613 SPAC listings on NASDAQ, raising a total of $145 billion – an increase of 91% from the amount raised in 2020 representing over 59% of total new listings, an increase from around 53% in 2020. In fact, even though all other IPOs increased by 88% from 2020 levels, SPAC listings increased almost 150%.
It seems prudent to take a serious look at this asset class.
“It really is a mainstream way for companies to go public,” ~ David Batalion, head of SPACs at Cantor Fitzgerald & Co
Trevor Lee
https://www.linkedin.com/in/trevorblee/
tblee@pm.me
Cell +44 7979 882992