SPAC glut powers exit spree for PE- and VC-backed companies

Blank-check companies announced five billion-dollar mergers on Monday, a sign that SPAC managers are wasting no time in finding target companies.

In the largest tie-up, Blackstone-backed benefits provider Alight was valued at $7.3 billion in its merger with investor Bill Foley’s Foley Trasimene Acquisition.

Digital advertising company Taboola expects to raise $545 million in a merger with Ion Acquisition at a $2.6 billion valuation. The Hillman Group, which makes home building hardware and is owned by CCMP Capital Advisors, was also valued at around $2.6 billion in a SPAC combination with Landcadia Holdings III.

Digital lock developer Latch plans to merge with a blank-check company started by Tishman Speyer Properties at a nearly $1.6 billion valuation. And solar company Sunlight Financial was worth $1.3 billion in a deal with an Apollo Global Management-sponsored SPAC.

Sponsors typically have two years to find a deal, but four of the five SPACs that announced merger agreements on Monday went public in the past four months. The oldest, Foley Trasimene, went public in August.

“There’s a ton of competition [among SPACs],” said Wylie Fernyhough, a private equity analyst at PitchBook. Some sponsors may feel motivated to get deals done while there is still a supply of high-quality target companies interested in blank-check mergers, Fernyhough added.

Target companies may also be contributing to the speedy deal pace. One of the principal advantages of a blank-check merger, industry watchers say, is a shorter timeline to go public than a traditional IPO—thus allowing private companies to take advantage of high stock market valuations.

More than 250 SPACs went public in North America last year, raising around $75 billion, according to a recent PitchBook report. And new ones are born daily: already in 2021, 67 blank-check companies have raised $17.5 billion in US IPOs, PitchBook data shows.

Blank-check deals have added to an already healthy exit market for both PE- and VC-backed companies. Last year, the exit value for both PE- and VC-backed portfolio companies in the US exceeded 2019 levels, according to PitchBook data.