Are SPACS Hurting Business for MM M&A?
Because so many smaller companies are electing to go public via a SPAC, has this new trend diminished business for MM IB firms that would have traditionally been hired to sell some of these smaller/mid-size companies to PE firms?
At a MM coverage group. Had a record year for the group last year largely due to M&A. On track for another record year and are inundated with M&A mandates plus increased capital markets activity. I am personally staffed on ~5 SPACs right now (3 IPOs, 2 that have IPO'd and we are now working for on the buy-side) in addition to 4 sell-side transactions (3 of which started in/after January). Still a lot of M&A going on across the board.
SPACs serve a purpose and are likely here to stay but not all M&A targets are public market ready thus the SPAC activity doesn't really affect them, especially for sub-$1B EV companies. Also strategic acquirers are still going to pay more for solid targets than a SPAC would due to synergies. Could make the argument that it takes away IPO business as targets of SPACs are the same ones that would look to go public through a more traditional form, but ECM groups (at least ours) are swamped due to the SPAC activity so I'd argue that it doesn't affect overall production.
Got it. So ECM activity for SPACS at your company is high? Media accounts seem to indicate that all these high profile SPACS seem to run thru Big 3 and mid-tier BBs, but from your experience, MMs are also benefitting from SPAC craze?
Yup, extremely active in the space. Full disclosure, I have not kept up with league tables so maybe we are an outlier, but from talking to my friends at other MMs it seems like everyone's getting crushed by these right now. Definitely depends on the product, we're not going to be competing for lead on one of Chamath's SPACs or PSTH, but on a $100-$300M IPO targeting a $700M-$1.2B acquisition MMs are winning lead/joint UW roles.
I think I read we're on pace for something like 1000 SPAC IPOs by YE 2021 with the current volume. Wide range of sizes and industry focus, going to have a lot of different participants from the underwriting side.
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