FREE

SPAC Talk

Off to the races again? In terms of deal activity, following an unusually sluggish July, August has started in spritely fashion. Only six new IBC deals were penned last month, with a total value of $1.9 billion, making it the slowest month in deal flow since April 2020. Meanwhile, the first week of August has already delivered five new IBC transaction announcements worth a total of $3.7 billion. This month’s tally includes a couple of sizable deals. The largest is SPAC Churchill Capital Corp VII’s (CVII) ~$1.58 billion deal with UK-based private equity compounder CorpAcq, which is expected to generate almost $1 billion in revenue and more than $150 million in EBITDA this fiscal year. This places an EV/EBITDA multiple on the target of 10.3x versus mean multiples of ~16x and 13x for its European and US comps, respectively, according to the transaction’s accompanying investor presentation. While CVII experienced 58% of its trust redeemed in a May extension vote, this deal might make the SPAC’s remaining public shareholders think twice about redeeming when this deal closes. Live SPACS continue to decline in number. The momentum in the maturation of SPACs continues. While the pace of liquidations has eased in recent weeks, nevertheless, they continue to outpace SPAC IPOs. As of writing, the total number of liquidations YTD is 144 (including those scheduled to liquidate in August), which is within touching distance to the 146 total recorded for the whole of 2022. By comparison, SPAC IPOs have numbered just 21 so far in 2023, with a pipeline of pending IPOs standing at 44. Adding the 48 completed IBC transactions this year, there are currently 366 live SPACs in the market, the lowest total since January 2021. The number of SPACs searching for targets is 199, a total not seen since the onset of the SPAC boom, while 167 SPACs have mergers pending. The ETF landscape – boring is good. Our SPAC Talk Focus considers the SPAC ETF landscape, which has changed significantly since we last delved into the topic in our SPAC Talk on March 11, 2022. At that time, the number of SPAC ETFs had proliferated from zero to nine within a matter of two years. As of today, there are five live SPAC ETFs. None of these ETFs provide exposure to de-SPACs but are limited to pre-merger SPACs. These are effectively low-risk fixed income substitutes, all of which have delivered positive IRRs in the mid- to high-single-digit range since they were launched. In SPAC land, boring can be good.