As the market volatility and disruptions increase, M&A (Merger and Acquisition) deals have become more relevant. Whenever we discuss M&A deals, we cannot leave out SPACs (Special Purpose Acquisition Companies). The sole purpose of SPACs is to indulge in M&A deals. In February 2021, the global SPAC acquisition activities amounted to around USD 100 billion.
To understand how large a number it is, you must know the value of SPAC acquisitions in 2020. During this year, the global SPAC acquisitions amounted to USD 152 billion. SPACs are increasingly looking for M&A support to indulge in high-value deals. Read on to understand SPAC M&A support and strategies for successful M&A transactions.
Understanding how SPACs work
Before understanding the key strategies for successful mergers and acquisitions, you must know how SPACs work. SPACs are established for the sole reason of indulging in a merger or acquisition. Usually, high net-worth individuals come together to incorporate a SPAC. A SPAC is a public company that raises funds by offering shares to the public. The company partnering with a SPAC for a merger or acquisition also becomes public. Here is the generic lifecycle of a SPAC:
- A group of high net-worth individuals come together to establish a SPAC
- SPAC shareholders partner with a reputed third party to achieve the M&A goals
- The SPAC launches its IPO (Initial Public Offering) to collect funds
- The money collected via an IPO is secured within a trust fund
- A SPAC must search for a target company to merge or acquire within a given duration, usually within two years
- With the help of target screening, owners of a SPAC identify the right partner for an M&A deal
- The M&A deal is finalised, and the target company also becomes public
- The company indulges in De-SPACing and becomes a regular company
Understanding SPAC M&A support services
SPACs are involved in multiple processes to achieve their M&A goals, from incorporation to De-SPACing. Even though shareholders and owners of a SPAC are experienced investors, they might not indulge in research and analysis. For the same rationale, they consider a third-party offering SPAC M&A support services. By doing so, shareholders and owners focus on their business goals while research and due diligence processes are completed by the third party.
A reliable M&A support firm will help the SPAC with IPO launch, target screening, due diligence, capital generation, De-SPACing, and many other processes. Firms offering support services have a team of M&A experts to help the SPAC find the right partner. In this competitive business landscape, SPACs can achieve their M&A goals with the help of a reliable third party.
Strategies for successful M&A transactions
A reputed third party can help a SPAC implement the right strategies for successful M&As. Here are the widely used strategies for successful M&A transactions:
Indulge in due diligence to find the right partner
You cannot choose the first target company you stumble across. Numerous target companies are selected for SPAC acquisition or merger. Investors must find a suitable target company that matches their investment strategy. With the help of due diligence, SPACs can discover target companies that align with their investment portfolio. Due diligence is an investigative process essential for an M&A deal. It helps uncover all details related to the target company and make informed decisions.
Understand the profits of the M&A deal
M&A experts always suggest following the money. After completing the merger or acquisition, a SPAC will operate as a regular company. It might become a product-based or a service-based corporate entity. It is best to consider these things before indulging in an M&A deal. It includes how a SPAC will make money after becoming a regular company. If these points are not discussed, the SPAC might fail as a regular company.
Choose the right people
The owners of a SPAC need to choose the right people for business operations after an M&A deal. Owners can choose the people from the existing SPAC and the target company or partner. It is essential to resolve the people and administrative issues before indulging in an M&A deal. Owners must prepare a blueprint of how the company will operate after De-SPACing.
Look out for cultural integration
A SPAC should look for a cultural fit with the target company before indulging in a merger or acquisition. Both companies must have a similar work culture, vision, talent retention scheme, and other attributes. When there is a cultural fit between two companies, they tend to perform better after a merger or acquisition. SPAC M&A support can help companies find the right target company with a cultural fit.
In a nutshell
SPAC M&A support can help implement the right strategies for successful corporate restructuring. Owners and shareholders of a SPAC can reduce their burden by partnering with a third-party offering M&A support services. Implement the right strategies for successful M&A transactions!