By Brandon Mavleos, Sr. Director, Product Marketing
In a recent Datasite & Pitchbook led webinar, 73% of participants said that they would consider SPACs as a viable exit option in the future. This backs recent sentiments, as SPACs continue to make news headlines nearly every day. Sponsors, advisors, and target companies flock to highlight the many advantages of the vehicle – including the ability to manage market risk effectively, and sidestep lengthy processes involved in a traditional IPO.
However, the reemergence of SPACs comes with growing pains. Some recent mergers have not performed well, highlighting the need for better due diligence, investor support, and public readiness. Market participants recognize this and have looked at new technology options which can help alleviate these pain points across the SPAC lifecycle. In this blog post, we’ll look at tips for sponsors, advisors, and target companies to improve odds for a successful outcome.
Maintain learnings throughout your target search and consolidate on one source of truth.
It’s no secret that great target companies are consistently getting more attention from SPAC management teams. The right fit takes time, and sponsors will need to pitch to multiple targets before a fit is consummated. It is therefore essential to be using best-in-class buy-side M&A due diligence software. Specifically, having a single location to house all target documents securely while maintaining barriers and specific permissions will enable you to have a better vision for how your target search is going holistically. Connect this directly to your process tracker so that founders and legal/financial advisors are informed of any new developments in the process.
Of course, it’s also possible to conduct these activities effectively with desktop spreadsheets & shared drives, but this runs the risk of information slipping through the cracks, potential visibility issues, and missed timelines. Leveraging a solution built for this process, like Datasite Acquire, can help with many of these challenges and has been proven to reduce deal times.
Recommend the right tools to ensure a smooth PIPE process.
While a hoard of dry powder still exists in the market, institutional investors are cautious about deploying capital as the economy recovers from COVID-19. This has made it more difficult for advisors who are often working with sponsors and target companies to shore up the capital needed to fulfill the acquisition price. The PIPE can therefore prove to be a roadblock against the tight timelines within the SPAC process. Unfortunately, too often, the investor search is conducted manually via emails & spreadsheets. “A banker is sending out 500 teasers and NDA’s manually to potential investors”, says Charles Shannon, VP of Corporate Development at Datasite. This can create panic amongst a deal team – Spreadsheet crashes? Out of date tracker? Delayed engagement with investors – all problems that are common in managing the PIPE process.
New tools exist which allow for a more efficient and mistake-free engagement. For example, Datasite Outreach offers automatic tracking for a PIPE process, accompanied by bulk email and watermarking tools so that investment bankers can help their clients (and SPAC sponsor) find institutional investors faster. Get the capital needed, obtain shareholder approval, and consummate the merger to facilitate a great outcome.
Open a VDR 12-24 months in advance to help with public readiness.
“If you are thinking about a SPAC or another exit option within the next 12-24 months, start uploading and organizing the files that will be critical for review in the upcoming process”, says Shannon. Whether you are approached by a SPAC management team or meeting them proactively, it’s essential to have your documents in order. This will help you / the sponsor assess the fit and decide if the merger makes the most sense for all counterparties and outside investors. If moving forward, readiness is also crucial during the De-SPAC and PIPE process, as you will need to work with your advisors to quickly build out your VDR index, to ensure a smooth process. “Don’t wait to be prepared, a company should always be deal ready and have a data room ready at all times”, says Shannon. “You just never know what’s coming around the corner. You do not want to be the bottleneck in slowing down your process in any way”.
If you know an exit is on the horizon, check out a commercial-grade VDR, such as Datasite Prepare. Lean on bulk upload, AI-enabled auto-categorization, and document previews to help you get started. Email info directly into the data room so that everything is in one secure space. Then shift directly to Datasite Diligence, where you can invite sponsors and advisors. Superior data, analytics, and reporting enable you to get through the SPAC lifecycle with ease.
If you have any questions on how Datasite can help you or your clients throughout the SPAC to De-SPAC process, reach out today! We have 50+ years of experience in M&A and Capital Markets, working with clients to achieve successful outcomes.