Preparing portfolio companies for a SPAC merger
The rise of special-purpose acquisition company (SPAC) transactions is pushing attention to the private equity (PE) space, where promising portfolio companies present opportunities for strong sponsor incentives and investor returns. But if PE managers want to make the most of SPAC opportunities, they may need to help their portfolio companies prepare for the road ahead.
How private equity fits into the SPAC revolution
The acceleration of SPAC transactions and the desire to complete deals with target companies means many venture capital or PE-backed portfolio companies may be public sooner than previously expected. Though the number of companies that are immediately ready for a SPAC transaction may be low, demand is high. The same is true for the advisers and other external service providers who are typically involved in a SPAC transaction.
Not all target companies are ready for the de-SPAC process that merges a private company with a publicly traded SPAC. They may have a promising business and an experienced management team but lack awareness of the key milestones and action items necessary to complete a deal. If PE managers are expecting to take advantage of SPAC opportunities, they may need to help their portfolio companies anticipate impediments.