Sunday, August 14, 2022

Merger Monday for Spacs with $ 15 billion in transactions

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Special Purpose Acquisition Firms Completed Mergers Worth Over $ 15 Billion On Monday, A Sign Of How Wall Street’s Euphoria For The Launch Of ‘Blank Check’ Vehicles Is Building to become a major force in making private companies public.

Five deals worth more than $ 1 billion have been reached with Spacs, led by the $ 7.3 billion merger of Alight, a cloud human resources services provider controlled by the group of Blackstone private equity, with a vehicle launched by US billionaire Bill Foley.

Christian Naglar, a partner at Kirkland & Ellis law firm, said there was “an avalanche effect” from private companies selling or merging with Spacs. “People are finding that there are many advantages to selling to a Spac over an IPO on a regular basis.”

the frantic activity is fueled by the growing number of Spacs in the market and by a constant influx of new capital. There are now 129 Spac looking for private companies to target while Spac’s new show has a record breaking start in 2021, Refinitiv data shows

This year, 66 Spac launched and raised $ 18.3 billion, surpassing the $ 13.2 billion raised under traditional initial public offerings globally. Last year, a record $ 79 billion was raised by Spacs.

The litany of Spac listings and mergers accompanied a rebound in the US stock market, with the benchmark S&P 500 up 75% from lows reached last March. The rally was fueled by billions of dollars in stimulus from the Federal Reserve to support the U.S. economy during the pandemic, but had the effect of seeing investors hoarding stocks to unprecedented levels.

Other Monday deals included a Spac launched by Richard Handler, general manager of Wall Street investment banking Jefferies Group, and Tilman Fertitta, owner of the Houston Rockets basketball team, who agreed to merge their vehicle with the Hillman Group, a private equity firm. owned by a hardware manufacturer at a valuation of $ 2.6 billion.

Taboola, an Israeli company that operates online advertising networks, has agreed to merge with Ion Acquisition for a valuation of $ 2.6 billion, while Latch, a venture capital-backed smart lock maker, has merged with TS Innovation Acquisitions, backed by Tishman Speyer, in a deal valued at $ 1.56. bn.

Spacs, which raise money from investors by listing on the stock exchange, typically have two years to research a company to go public using the income it collects. Executives behind the vehicles are touting them as a faster route to public markets compared to the traditional IPO process, but there have been growing concerns about the quality of companies listed through Spac deals. .

Goldman Sachs chief executive David Solomon recently distinguished between companies that use Spacs to go public by choice and those that have no other alternatives. He said on a call with analysts last week that the pace of the “blank” vehicle the lists were not viable.

Investors see investing in new Spacs as a way to make money in a low interest rate environment with virtually no opportunity costs. And the fund managers who seeded the initial funds for many of these shell companies have grown, said Mark Brod, a partner at Simpson Thacher.

“What was once a niche product marketed to very sophisticated hedge funds has grown,” he said. “There are a lot of hedge funds investing in the Spac offerings, but now there are a lot of traditional long-term investors. . . who participate. “

Mr Nagler of Kirkland & Ellis added: “There are certainly a lot more Spac looking for companies to buy than a year ago, however, many sponsors tell us there are a lot more. sellers willing to deal with a Spac than a few years ago. . ”


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