Noticed a LOT of SPAC activity lately, and expect it may only increase given the volume of PE / VC portfolio companies getting long in the tooth + the time / expense of the IPO process. Given that the purpose of these companies is to acquire a business, do they have in-house corp dev guys? If so, what do these groups look like and what happens to them after they do a deal? Seems like an interesting role to be in since it's a way to do something entrepreneurial at a scale / risk level that I'm comfortable with.
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Typically, it’s just a handful of folks (2-3) that form the core management team of the SPAC and they’ll outsource a lot of the buy side calling efforts to different investment banks or hit the pavement themselves to try and gin up a deal.
If successful, the economics work out very well for that core group. 5-6 years ago people thought this method of consummating a deal / going public was crazy - it has come a longgg way.
Agree with the comment above. Was on a sell-side that sold to a SPAC. Really only had communications with the CEO of the SPAC. They had 6 IBs acting in financial advisory and capital markets capacities. Everything seemed farmed out.
SPACs are definintely in a bubble given the market volatility - this is dot com level type of stuff. There are currently over 80 SPACs looking for a target to take public. It won't be hot anymore once the volatility subsides. There's less of a stigma now than there was before, but the deals for the most part are pretty hard to do in a normal market environment.
Sometimes SPACs hire analysts and you can get paid in founder shares.
I work for a SPAC, there are typically two different org set-ups:
PE / Advisory firm SPAC - There is much less infrastructure in this set-up since the PE fund / advisory firm already has investment staff and biz dev folks. Usually these firms leverage the existing staff for sourcing and executing a business combination, I haven't seen much hiring outside of these firms (think Gores, M. Klein, Social Capital, etc.).
Standalone SPAC - I work at this type, we have a dedicated SPAC team which works across multiple vehicles we have out in the market. The team size is about 5 - 10. For most sponsor with only one SPAC out in the market the team will be quite lean, in some cases its just a few partners with no junior staff - really depends on who is running the SPAC. For us, we do not have a dedicated deal sourcing team as we have a lot of external deal flow from advisors, personal relationships, etc. I would assume that some standalone SPAC's use biz dev staff - however from what I have seen this also blends in with deal execution (example a friend of mine joined a SPAC and is doing Biz Dev and transaction execution work).
To answer your question on what happens after the deal is done - this really depends on the SPAC. If you have a track record of doing successful deals then you should have no problem raising another SPAC. We generally cue up a SPAC before our previous one has closed so that there is no down time. Some SPACs may also set up a top-co structure where they fund payroll for the sponsor team (this can mitigate the risk of having a few months without a SPAC to pay your employees). If you're interested in joining a SPAC I would look at their track record, deal flow (specifically if it's all investment banking outreach - this is not optimal) and SPAC corporate structure.
Feel free to message me if you have any additional questions, happy to chat.
Thanks so much for your thoughtful reply that was super helpful. Curious as to what you think it'd be like starting a career at a place like M. Klein or Gores?
Both great options, if you can get the interview and ultimately get hired. Both of those firms are selective and have relatively small SPAC teams. At Klein you would also be doing advisory work - I don't think they have any junior staff that are solely dedicated to their SPACs.
Hi there! For a SPAC interview questions what are the types of questions asked usually?
Feel free to message me, I can give you some typical questions we ask in our interviews.
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Would a SPAC buyout deal be looked upon just the same as any other buyout experience or is there stigma because its a SPAC? At one of the private credit sponsored SPACs looking for deals and wondering if the experience can be levered to pivot to straight PE.
Let us check out an example in the EV industry Lucid Motors, now a publicly-traded company. following the completion of a merger where it fetched an eye-watering $4.5 billion in fresh capital from Churchill Capital IV (the SPACl . one of the biggest EV startup SPAC merger last year. what I want to bring to the point is that majority of SPAC focus on moving startups to IPO which may look like a threat to the VC industry. why some startups go to IPO through SPACs was because n they don't want to go through the traditional IPO which negotiating with multiple investors, usually institutional investors, which is complex and annoying. Plus, uncertainty can tank your IPO — remember WeWork? The company expected to raise, like, $4 billion with an IPO. Instead, people staged dramatic readings of its S-1 as comedy routines, and the IPO was cancelled. With a SPAC, the IPO is very fast. All you’re doing is negotiating with one party: the SPAC that might acquire the firm. That means you already know the valuation, you don’t have to do a roadshow, and you can cash out your existing investors. Plus, the whole process is a lot faster because you’re only negotiating with one party! “When you compare it to an IPO, the pitch is actually very simple: it is a better way to go public
I don't know if SPACs provide so much more certainty of closing vs a traditional IPO now...especially compared to last year. I work at a fund that has a SPAC vehicle, and the #1 thing targets are asking these days, even before formal meetings, are questions regarding certainty of closing...redemptions, ability to backstop a PIPE, ability to even raise a PIPE, etc. This is a problem, which will only increase, for SPACs targeting VC-type businesses because redemptions these days are 75%+ and everyone who raised $ for SPAC PIPEs last year got burned. Some sponsors can back stop the whole thing and get a deal done, but at that point their economics as sponsor are almost entirely diluted...at least they don't lose their risk cap, I guess.
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