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Developments in the Special Purpose Acquisition Company (SPAC) Market

Originally published on Business Law Today, Woodruff Sawyer’s Yelena Dunaevsky gives her recount of the February 6, 2020 annual SPAC conference held in New York City.

At this annual conference, attendees discussed the latest trends and developments related to Special Purpose Acquisition Companies (SPACs), which have been increasingly popular over the past three years. Legal teams, financial advisors, and other experts are becoming more and more interested in SPACs as an alternative investment vehicle.

The dollars being raised by a maturing SPAC market is making headlines and garnering attention. In 2019, the average IPO amount raised by a SPAC was approximately $230 million. In that same year, 59 SPAC IPOs made up 27% of all IPOs and raised nearly $13.6 billion.

Once a SPAC raises funds in an IPO, the group then deposits those funds into a trust while it searches for an attractive private acquisition target—most often targeting assets with valuations of three to six times that of the cash raised in the IPO. SPACs could use PIPEs or debt as additional sources of acquisition funds and they typically have two years to finalize an acquisition. Ninety percent of SPACs are indeed able to complete a business combination or acquisition during that time frame, according to information discussed at the February SPAC Conference.

At the time of the Conference, there are 98 SPACs with roughly $22 billion in trust-held funds actively looking for acquisitions.

Read more from Yelena Dunaevsky on SPACs and Mergers & Acquisitions
View more from Woodruff Sawyer on SPACs: Special Purpose Acquisition Companies