SPACs target Asia for merger deals

248 SPACs listed on U.S. exchanges in 2020, raising $83 billion, according to Bloomberg

Special purpose acquisition companies, or SPACs, are now eyeing the Asian market for merger deals as they compete to finalize deals before their initial public offerings (IPOs) expire.

SPACs, also known as blank-check companies, have become a popular vehicle on the U.S. market for taking private companies public. SPACs generally operate by raising money through an IPO and then entering into a business combination with a company with existing operations, often through a reverse merger.

According to Bloomberg, 248 SPACs listed on U.S. exchanges in 2020, raising $83 billion. Another 93 have listed since the start of 2021. About 85 percent of SPACs are based in North America, with 5 percent in Asia.

Asia is the next big treasure trove for SPAC candidates, Joaquin Rodriguez Torres, co-founder of investment fund Princeville Capital, told Bloomberg. Torres said he has been in talks with several Asian companies for a possible business combination through his SPAC Poema Global Holdings.

Funds that have expertise in both companies operating in Asia and how U.S. capital markets work hold a significant advantage, Torres added.

The race to find Asian merger targets is intensified by the fact that most SPACs need to make deals within 24 months of going public or risk being dissolved.

If 2020 was the year of the SPAC, 2021 is the year of the de-SPAC, Mitchell Presser, co-chair of Morrison & Foerster’s global corporate department, told Bloomberg. A lot of these SPACs will be looking at Asia for de-SPACing opportunities.

The SPAC frenzy also coincides with accelerating investment in Asian companies by VC firms.

SPACs have grown in popularity in part because of the high expense of taking a private company public. According to PwC, the average underwriting fee is 7 percent for a range of $25 million to $99 million. That number decreases to about 3.5 percent for deals above $1 billion.