After U S SPAC frenzy blank check firms eye deals in Europe’s
The SPAC craze starts to gain traction in Europe
After SPAC’s frenzy in the US, so-called special-purpose acquisition companies are on the hunt for deals in Europe’s burgeoning tech market..
After more than a successful year for SPAC in the USA, an increasing number of "dummy companies" raise funds with the intention of buying some European tech firm.
SPACs are shell companies that are formed with the sole purpose of raising funds to acquire an existing private company so that the target company can bypass the traditional initial public offering / offering (IPO) process.
These unlisted companies raised a total of $ 78.2 billion in 244 US IPOs last year, according to Refinitiv. The popularity of SPAC in the US continued into 2021, when 134 more companies have raised nearly $ 39 billion since the beginning of the year..
The appeal of SPACs is that they offer companies the opportunity to speed up their listing on the stock exchange. An IPO can be a much longer process, and some firms choose not to go the traditional route to avoid potential swings in market sentiment. IPOs are also receiving criticism from venture capitalists, who fear that it would undervalue their real value..
SPACs are an alternative to IPOs as well as direct listings, where companies sell existing shares to investors on the public market. They often attract fast-growing tech companies. Last year, British electric vehicle maker Arrival announced a public offering through a merger with a US special purpose vehicle..
Europe has largely missed the SPAC boom. Just three of these SPACs registered in Europe last year, netting $ 495 million. And this year not a single SPAC has debuted on the European continent yet..
SPACs are not a new phenomenon, but they thrived in the US in 2020. After SPAC completes its IPO, investors’ funds are held in a trust account and shareholders can vote against the deal if they disagree with it and thereby get their money back..
Industry insiders say SPACs tend to have a slightly different structure in the US than in Europe. There are far fewer publicly traded tech companies in Europe than in America, making it difficult for investors and analysts to assess and benchmark companies in this sector..
The London Stock Exchange is trying to attract more SPAC and has already contacted law firms and banks to see if they can facilitate the listing of such companies, a source familiar with the situation told CNBC..
Meanwhile, the UK has begun revising its listing rules to bring more tech companies into the market. Europe as a whole had a noticeably quiet year in terms of tech IPOs last year, while the US saw a number of major debuts, such as companies like DoorDash and Airbnb..
«Unfortunately, interesting and attractive companies in Europe do not have the same access to capital as in the United States, neither in the private sphere, nor in the public markets.», – said on CNBC «Street signs of Europe» Makram Azar (Makram Azar), CEO of Golden Falcon Acquisition Corp – SPAC, which focuses on European technologies.
«For example, the venture capital pool in Europe is much smaller than in the US, and the IPO market is very weak.» – he added.
An increasing number of dummy companies are registering in New York with the main purpose of buying a European technology firm..
Hazard, the former chairman of the European Bank at Barclays, raised $ 345 million for his SPAC in an IPO in December. Golden Falcon aims to become European «champion» in the field of technology, media and telecommunications (Technology, Media, and Telecom, TMT) or fintech startups.
«In Europe, there are over 60 «unicorns» in the field of TMT and financial technologies», more than 20 of which are based in the UK, Azar said, adding that he sees «very attractive companies» in this region.
Fintech has been a particular boon for the technology sector in Europe over the years. The share price of Adyen, a payment company registered in Amsterdam, has more than doubled from last year. And more valuable companies such as Checkout.com and Klarna are popping up in private markets..
Another SPAC, North Atlantic Acquisition Corp, raised $ 379.5 million in its IPO last month. The company is mainly looking for acquisition targets in the consumer, industrial and technology sectors in Europe..
«This is an interesting market in Europe, says Gary Queen (Gary Quin), CEO of North Atlantic Acquisition Corp and former vice chairman of investment banking at Credit Suisse in Europe. «We see a stream of deals coming from several different areas».
Quinn said he expects his SPAC to secure a merger deal with a European company. «somewhere between January and two years later».
Some European companies are already thinking about merging with SPAC companies..
More than 10 European tech companies called one such SPAC shortly after the IPO, a source familiar with the situation told CNBC. The person chose to remain anonymous due to the sensitive nature of the discussions.
SPAC cannot solicit potential clients for a merger until they are listed.
When it comes to technology, Europe is often considered to lag behind the US and China, but the region is growing rapidly. European startups raised a record $ 41 billion in funding last year, according to London-based venture capital firm Atomico..