Many SPAC sponsors in the market today are, or expect to be, serial SPAC sponsors. Today’s SPACs are backed by accomplished teams that have extensive proprietary deal sourcing networks, experience as M&A dealmakers and demonstrated track records of success in value creation. The SPAC is in essence its sponsor team - its founders, management and directors - and markets itself based on that team and what it can bring to a potential target. As shown below, the 2020 volume eclipsed the prior five years combined. In 2019, there were 59 SPAC IPOs, raising approximately $12 billion of gross SPAC IPO proceeds. These figures represent a massive 320% increase in the number of SPAC IPOs, nearly a 525% increase in gross IPO proceeds and a 23% increase in the number of de-SPAC transactions, as compared to 2019, which itself was a banner year for SPACs. At the other end of the SPAC life cycle, a record $56 billion of de-SPAC transactions were announced in 2020. SPAC activity has significantly accelerated as investors seek attractive opportunities and as companies seek to partner with these best-in-class sponsor teams and exert more control over valuation and share price, including to mitigate some of the market volatility risks associated with a traditional IPO.Īccording to the research firm Deal Point Data, a record 247 SPAC IPOs were completed in 2020, raising total gross proceeds of approximately $75 billion, or 53% of the total number of offers and 48% of the overall IPO market by value.

The popularity of SPACs can be attributed to various factors, including highly regarded sponsor teams, their unique investment structure, a better understanding by the market of the SPAC structure, the well-established complementary private investment in the public equity (PIPE) financing market, and the potential attractiveness for target companies of the subsequent acquisition as compared to a traditional IPO or M&A transaction.

The SPAC is required by its charter to complete that initial business combination - or “de-SPAC” transaction - typically within 24 months, or liquidate and return the gross proceeds raised in the IPO to the public shareholders. SPAC prevalence is set to continue through 2021, with a significant number of both SPAC and de-SPAC transactions already in the pipeline.Ī SPAC is a public, NYSE- or Nasdaq-listed acquisition vehicle through which a sponsor team raises a pool of cash in an IPO and places that cash in a trust, to be used solely to acquire an operating target company. This is due in part to an evolution of the SPAC vehicle, which now offers enhanced investor protections and positions sophisticated managers as “sponsor teams” that guide the company through both the SPAC IPO and the de-SPAC process, as further described below. SPACs have been around for 15 years and now are established as a legitimate alternative to a traditional merger or IPO. Transactions by special purpose acquisition companies, or SPACs, exploded in 2020, resulting in a 320% increase in the number of SPAC initial public offerings (IPOs) compared to 2019.

De spac transaction structure