PE firms line up to launch blank-check companies amid 2020 spike

Special Purpose Acquisition Companies (SPACs) are growing in popularity among private equity firms wanting to differentiate their product offerings and make the most of their deal pipelines.  The launch of these companies, has grown exponentially in 2020.   In the third quarter, SPAC IPOs accounted for 56.3% of normal IPOs in the U.S., the highest quarterly margin across the past two years, up from 26% in the same period in 2019, S&P Global reported this week in an article that included comments from CohnReznick’s Jeremy Swan.

"When you get these big names either coming out of big private equity firms or you get the big private equity firms backing the SPACs, it just lends them further validation and has more people thinking about it,"  Swan, who is Managing Principal of CohnReznick's Financial Sponsors & Financial Services practice, told S&P Global.

The article notes the reasons SPACs have become more popular within the private equity ecosystem and have accelerated because of the coronavirus pandemic. 

During the pandemic, it has become very difficult conducting in-person roadshows, which are typical in advance of issuing an IPO.  "From a SPAC perspective, the roadshow doesn't happen. The financial backers are there, they're launching the process, you have the typical institutional buyers, you have the opportunity for co-investment alongside, and it provides a faster time to market, maybe more certain valuation, and potentially greater liquidity in a shorter period of time."

Click here to read the full article from S&P Global.