Many of the SPACs that went public in 2021 and 2022 are now nearing the end of their hunting period to identify and complete a deal prior to the time that they are required to wind-down the SPAC and return the IPO proceeds to investors..
Around 300 SPACs have deadlines to merge with an operating company by the end of 2023, making this small window of time opportunistic for de-SPAC transactions. Additionally, the economics of the SPAC structure, which provides significant incentives to SPAC sponsors to consummate a merger, result in the SPAC sponsors being highly incentivized to negotiate terms of a deal that are favorable to the target. While the volume of SPAC’s has and may continue to decline, there are still opportunities for highly motivated SPAC’s and strong target companies looking to come to market. Despite its decline in volume, SPACs have been around for decades and provide an important function in capital markets, providing an alternative form of venture capital financing that still have advantages over traditional IPOs to bring private companies public, notes Seward & Kissel.
SPAC companies nearing their de-SPAC deadlines should be on the lookout for these mature private companies that are ready to tackle the public capital market. 2023 could be a breakthrough year in the de-SPAC process, showing a greater percentage of successful de-SPACed companies.
Seward & Kissel said it will continue to monitor the development of de-SPAC transactions and the way they continue to evolve during this opportunistic time. Read more.
