SPACs

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The recommended reforms aim to make the UK’s listing regime more competitive while maintaining high standards of corporate governance, shareholder rights, and transparency.

By Chris Horton, James Inness, and Anna Ngo

A new independent review (the Review), led by Lord Hill, has been released that provides recommendations on how the UK can improve its listings regime. Published on 3 March 2021, the Review aims to impart recommendations that will improve the process of raising equity capital on the UK public markets, whilst also maintaining high standards of corporate governance, shareholder rights, and transparency.

The recent rise to prominence of SPACs provides private equity portfolio companies an alternative method for stock exchange listing and access to the capital markets.

By Neil Campbell, Tom Evans, Paul Kukish, Ryan Maierson, David Walker, Suneel Basson-Bhatoa, and Catherine Campbell

Special purpose acquisition companies (SPACs) have emerged, somewhat unexpectedly, as the hottest market trend in the US this year, allowing SPAC sponsors to launch shell companies with the goal of taking private companies public via merger. SPACs are rare in Europe due to regulatory constraints — a SPAC acquisition is a deemed reverse takeover, likely to result in the SPAC’s shares being suspended and/or cancelled, with the enlarged group only readmitted following publication of a prospectus.

By James Inness and Anna Ngo

Special purpose acquisition companies, or SPACs, are companies that are incorporated for the purpose of making one or more strategic acquisitions. SPACs are also referred to as “blank check” companies or “cash shells”, which seek to raise capital by listing shares on a stock exchange. Each SPAC has its own investment criteria and focus, such as a specific industry. Alternatively, it may operate under the banner of a more generic acquisition mandate, which guides its potential acquisition strategy.

At the time of IPO, the SPAC is empty – it has no business operations or tangible assets. However, it will have an experienced management team, which usually includes the sponsors or founders, and an investment criteria, which the management team will seek to meet by identifying attractive targets for acquisition by, or merger with, the SPAC within 18-24 months from IPO. A failure to execute an acquisition within the timeframe will generally lead to the liquidation of the SPAC and a return of investment to the public shareholders.