Special Purpose Acquisition Companies (SPACs)

Special Purpose Acquisition Companies (SPACs) are a convenient way of raising finance for a specific purpose, most usually the acquisition of a third party company. Listing a SPAC on London Stock Exchange is a straightforward step by step process, beginning with an Initial Public Offering (IPO), that allows sponsors to attract a wide range of potential investors interested in generating returns through the acquisition of an attractive company or other asset. 

The IPO process

  • Capital raise via offering of share and/or warrant
  • Typically, the majority of gross proceeds are held in US Treasuries and other money market instruments
  • In SPACs, the sponsor subscribes for founder securities and can purchase additional warrants/ordinary shares to make sure they have 'skin in the game'

Post-IPO

Acquisition sourcing

The sponsor uses their network and industry knowledge to source a target for acquisition:

  • Average fixed period of 24 months to find and complete an acquisition
  • Longer timeline facilities may be attractive investments in weaker markets, where multiples are lower and distressed sellers may be more prevalent
M&A

The company uses proceeds, and can use debt and further equity issuance to fund acquisition of a selected target:

  • SPACs can require shareholder approval if they list on AIM, however shareholder approval is not required on the Standard Segment
Growing business

The company 'de-SPACs' and becomes a normal operating company.

  • The business operates under a public listing to create value for investors, alongside sponsors.
Trust liquidation

Liquidation occurs if the business combination is not executed within the agreed timeline:

  • Proceeds returned to shareholders minus expenses

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