SPACs Could Become Formidable Bidders in the M&A Market
How the combination of forward purchase commitments by SPAC sponsors, increases in the size of many SPACs and evolution in SPAC structures may make SPAC's a more formidable bidder for many opportunities that may have been out of reach in the past.
October 16, 2020 at 03:00 PM
8 minute read
2020 has been a record-breaking year for U.S. special purpose acquisition company (SPAC) activity, marked by significant growth in both the size and number of IPOs, novel changes in SPAC terms and the continued development of creative financing arrangements providing SPACs with capital incremental to IPO proceeds. These signs suggest SPACs will be more frequent and formidable bidders in the M&A market, competing for larger deals than they have in the past.
SPACs, also known as blank check companies, are non-operating entities formed to identify and complete a business combination, often in a targeted industry or sector, within a specified period of time after the SPAC's IPO. IPO proceeds are held in a trust until a business combination is identified, then used to fund the transaction together with proceeds raised through other financing agreements.
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