ICR’s October 2023 SPAC Market Update & Outlook report shows that the SPAC market has displayed signs of stabilizing in 2023 as increased merger activity and decreased SPAC liquidations offset the challenging dynamics of elevated redemption rates. Deal activity picked up in Q3 for closed transactions, an indication of renewed optimism. The 29 closed deals and $44.5 billion of newly public enterprise value (EV) in Q3 marked a large increase over the 10 business combinations with $15.0 billion in Q2 and an increase of 197% in EV. Liquidations have also fallen in each quarter of 2023.
“The SPAC market is demonstrating it can get deals across the finish line,” said Don Duffy, President of ICR. “At the same time, we are starting to see a bifurcation in the types of transactions – larger deals with SPAC sponsors that have lined up appropriate capital, or smaller transactions that are structured to accommodate high redemptions and thus less capital raised.” Duffy continued, “Regardless of the size of your deal, SPAC transactions require an advisor with experience across capital markets, investor relations, and public relations through the SPAC marketing process and beyond to create value for all stakeholders.”
In 2023, SPAC sponsors have re-evaluated their approach to getting deals done. SPACs have extended their timelines in order to find deals and consummate mergers. Repeat sponsors comprised six of the 22 SPAC IPOs; of the first-time SPAC sponsors, approximately 72% were based in Asia. Asia-based SPACs have cited a geographical advantage in sourcing deals and raising capital. Experienced sponsors have also shown confidence in the SPAC market through SPAC “takeovers” where a serial SPAC sponsor purchases SPAC economics from an existing sponsor party. With these dynamics and a backlog of 160+ pending mergers, the SPAC market should remain active into 2024.
“The increased activity in Q3 was complemented by a ‘back to basics’ approach to deal-making,” said Niren Nazareth, Managing Director at ICR Capital. “SPAC transactions are increasingly focused on solving for a target company’s needs, not just the next step in the SPAC process. That perspective has driven greater traction in certain PIPE processes, and motivated experienced sponsors to acquire existing SPACs (SPAC “takeovers”) with the intent to capitalize on their proprietary deal flow. These are positive signals for capital formation in the SPAC market. ICR can provide unparalleled insight and support on SPAC capital raising given our leading market share in SPAC transaction advisory.”
The traditional IPO market improved in parallel, further raising optimism for private companies with public aspirations. The 30 traditional IPOs in 3Q were in line with previous quarters yet raised an aggregate $7.8 billion proceeds, coincidentally the same amount raised in all of 2022. Arm Holding’s $4.9 billion offering, the largest tech IPO since 2019, was a meaningful driver of proceeds in a market that had primarily seen smaller issuers.
“After almost two years of relative inactivity, the IPO market has begun to emerge from hibernation with the recent successful execution of three technology IPOs and a few other notable transactions in the near-term backlog,” said Steve Parish, Co-Head of ICR Capital. “Multiple issuers that had been monitoring the market from the sidelines have initiated or are planning to kick-off their IPO process, which should lead to an active new issue calendar in 2024.”
ICR is the largest advisor and communications consultant to SPACs, having worked on over 150 transactions since 2021. To obtain a copy of ICR’s July 2023 SPAC Market Update & Outlook report, please click here.