We’re pleased to announce Freshfields’ 2021 De-SPAC Debrief: A comprehensive review of all de-SPAC transactions that closed in 2021. 2021 was a record-breaking year in SPAC M&A with more de-SPAC business combinations than any prior year.
With an eye to the future, we reviewed all 199 SPAC business combinations that closed in 2021, and have compiled a statistical summary of these deals. The data from these closed deals reflects and confirms trends in the de-SPAC arena which we expect to continue into 2022. We’ve summarized some of the report’s key takeaways below. The entirety of the report—including all 66 terms we analyzed—can be found here.
Record-Breaking Year in SPAC M&A
2021 was a record-breaking year in SPAC M&A with 199 closed de-SPAC business combinations, shattering the previous record of 64 closed de-SPAC business combinations set in 2020.
Deals Signed Quickly After the SPAC’s IPO
De-SPACs were signed very quickly after the SPAC’s IPO, on average 7.5 months post-IPO.
Deals Took Longer to Close
The time from signing to closing took longer, on average over 5 months, and getting through the SEC took longer, on average over 3 months.
Ubiquitous PIPE Financing
Virtually every deal had a PIPE (95% of closed deals), with some also supported by a forward purchase agreement, a sponsor backstop, convertible notes, non-redemption agreements or an OTC equity forward. The average PIPE was approximately $316 million in closed deals (the median was approximately $210 million).
Growth in Redemptions
Redemptions grew substantially from the beginning to the end of the year, with average redemptions of less than 5% in the first quarter of 2021 growing to average redemptions of over 60% in the fourth quarter of 2021. Some deals had redemptions of over 90%.
Mostly Equity Consideration
For sellers, the consideration was overwhelmingly either stock (64%) or a combination of stock and cash (36%). For deals with mixed stock and cash, the percentage of cash was less than 25% on average. 42% of the closed deals had an earnout, typically based on the target’s stock price (most often initially vesting at prices ranging between $12.00 and $15.00).
Sponsor Equity Forfeiture/Vesting Continues
Sponsor equity was subject to vesting or forfeiture or both in over half of the closed deals (23% requiring only vesting, 16% requiring only forfeiture and 19% requiring both vesting and forfeiture).
Certain seller-friendly terms have become standard in the de-SPAC market, with 95% of the deals having no indemnification, 93% having no purchase price adjustments, 94% having no post-escrows and 94% having a minimum cash condition, most often for the benefit of the target only.
Fewer SPAC Directors on Post-Closing Boards
SPAC representatives joined target boards less – there was only 1 SPAC director on average on the post-closing target board.
Few Fairness Opinions or Special Committees
Only 15% of the closed deals were supported by a fairness opinion and only 7% were reviewed or approved by a special committee of the board.
Everyone interested in SPACs—bankers, investors, company executives, private equity professionals, accountants, lawyers, communications and PR professionals—will find something of interest in the statistical data. For more information on SPACs, please contact any of the authors or your usual Freshfields contact. We look forward to 2022!