Due to increased market volatility, M&A (Merger & Acquisition) activities have gained hype in the corporate sector in the past few years. More than 63,000 M&A deals were completed globally in the year 2021. It is the highest number of M&A deals globally since 2010. The emergence of SPACs (Special Purpose Acquisition Companies) has fuelled M&A deals.
However, SPACs might not indulge in profitable M&A deals all by themselves. They need a helping hand to discover potential target companies and finalise the merger or acquisition deal. For the same rationale, the demand for third parties offering SPAC M&A support has increased in the past few years. Read on to understand the significance of third parties providing M&A support to SPACs.
Are you familiar with SPACs?
Before understanding the importance of M&A support, you must know how SPACs work. A SPAC is a public company incorporated to raise capital via an IPO (Initial Public Offering). Usually, experienced businessmen and investors come together to establish a SPAC. Once a SPAC collects money via an IPO, it searches for a target company for merger or acquisition. You can say that the final goal of a SPAC is to indulge in M&A deals. Once a SPAC finalises the merger or acquisition, it makes the partner company public. The entire process might be a little complicated, but it is completed with the help of third-party support. Here is the step-by-step process followed by a SPAC to make a target company public:
- A group of experienced investors and businessmen come together to establish a SPAC. These individuals have experience in different industry sectors and have high net worth.
- The SPAC launches an IPO and offers its shares to the public. The money collected from the IPO is kept within a trust account.
- There is a fixed time interval for a SPAC to search for a target company to indulge in an M&A deal. Usually, the time duration for a SPAC to search for a target company is two years. Within the given time frame, the SPAC searches for a target company that fits its investment portfolio.
- Once a target company is identified, the SPAC will indulge in a merger or acquisition deal. The target company might be public or private, depending upon the requirements of the SPAC. However, SPACs prefer to make a private company public.
- To complete the merger or acquisition, shareholders of the SPAC and the target company must agree. Usually, the process is completed via voting, and the decision is taken via a majority.
- Once the majority of shareholders approve, the merger or acquisition deal is finalised. The target company becomes public, and the shares are listed on stock exchanges.
Understanding the role of SPAC M&A support
As discussed above, SPACs require third-party M&A support to achieve their goals. Here’s why SPAC M&A support is essential in today’s business environment:
SPAC formation
Third parties can help a group of investors or businessmen form a SPAC. The formation of SPAC includes several processes like idea generation, documentation, and compliance. Often, an individual wants to incorporate a SPAC but has no partners. In such a case, a third party can help the individual find suitable partners to establish a SPAC.
IPO and post-IPO support
Without raising substantial capital, a SPAC can never achieve its goal. With reliable third-party support, SPACs can raise funds by launching a successful IPO. The third-party will help with structural and business plan analysis before the IPO launch. It will also help with targeting investors and roadshows during an IPO launch. Many public companies look for investments from private investors to generate capital. A SPAC needs external support for successful PIPEs (Private Investment in Public Equity). Once a SPAC completes an IPO with the help of a third party, it will have the capital required for a merger or acquisition.
Target screening
A SPAC needs to identify the right target for a merger or acquisition. The target company must fit the investment strategy of the SPAC. With the help of third-party SPAC M&A support, potential targets are identified. It includes peer benchmarking, due diligence, business model analysis, market mapping, competitive landscaping, and many other processes. With the help of a third party, the founders of the SPAC do not have to worry about target screening.
DE-SPAC support
Once a SPAC has completed its merger or acquisition, it functions as a regular company. The capital generated from the IPO is used for business operations or expansion. Often, the SPAC undergoes a name change with the partner company to become a regular company. Third parties offering SPAC support also extend DE-SPAC support.
In a nutshell
As the size of M&A deals globally is constantly growing, SPACs are gaining hype. With the right SPAC M&A support, a company can find the best partner for merger or acquisition. Search for reliable SPAC support to indulge in profitable M&A deals!
