April 21, 2021

Market Spotlight: SPACs are coming to Canada (Webinar Coverage)

By Rachel Stone, Technology Reporter, Mergermarket

Initial public offerings of special purpose acquisition companies on Canada’s stock exchanges, which have so far paled in comparison to the frenetic pace of US SPAC issuance, will likely increase this year, industry experts said during Mergermarket’s Canadian M&A Forum.

Senia Rapisarda, managing director at the private equity firm HarbourVest Partners, said she is expecting a “significant increase” in the number of SPAC IPOs, though not to the same level as seen in the US.

Just two SPACs were formed in Canada last year, according to data from Mergermarket affiliate Dealogic. Ceres Acquisition [NEO:CERE.U [OTCMKTS:CERAF], which listed in March 2020, announced an agreement to acquire Atlanta-based cannabis company Parallel this February. Nextpoint Acquisition [TSX:NAC.U] [OTCMKTS:NACQF], which listed in August 2020, announced an agreement to acquire Virginia Beach, Virginia-based tax preparation service provider Liberty Tax and Anaheim, California-based consumer and small business lender LoanMe, also in February.

Like Ceres Acquisition, many recent Canadian blank-check companies have tended to focus on the cannabis industry, according to Salil Ratnaparkhe, associate vice president of corporate development at Sun Life Financial [TSX:SLF], who said he is interested in seeing what the next generation of targets might be.

Mercer Park Brand Acquisition [NEO:BRND], which listed in May 2019, announced earlier this month an agreement to acquire California-based cannabis company Glass House Group for USD 567m. British Columbia-based Choice Consolidation [NEO:CDXX.UN.U], which listed in February, is looking for a US cannabis business at an enterprise value of USD 600m-USD 1bn, CEO Joe Caltabiano told this service this week.

Meanwhile, HarbourVest’s Rapisarda said many Canadian companies looking to go public are weighing whether to list in the US or Canada and whether to do so via a SPAC merger. The economics of a SPAC merger can be “interesting,” and the speed of a transaction can be “particularly appealing,” she said.

Sean Dainty, vice president of Canadian sales at Datasite, highlighted the backlog of available private investment in public equity (PIPE) deals — which is a popular way of bolstering a SPAC merger with additional private capital — as a potential roadblock moving forward.

Only four US SPACs have found Canada-based targets, according to Dealogic data: Northern Genesis Acquisition’s [NYSE:NGA] merger with zero-emission vehicle manufacturer The Lion Electric Company last November; Peridot Acquisition’s [NYSE:PDAC] bid for lithium-ion battery resource recovery company Li-Cycle in February; Sustainable Opportunities Acquisition’s [NYSE:SOAC] purchase of lower-impact battery metals developer s DeepGreen Metals in March; and Research Alliance I’s [NASDAQ:RACA] deal with biopharmaceutical company POINT Biopharma also in March.

SPACs have surged in the US in the last 12-plus months, and the first three months of the year already outpaced record issuances and business combinations seen in 2020, according to Dealogic data.

The craze has yet to hit its northern neighbor. While issuance is expected to increase, Canada is unlikely to see celebrities or basketball players creating their own blank-check companies, said Jeff Swinoga, co-leader of national mining and metals at EY Canada.

Given the fragmentation in areas like electric vehicle batteries and critical metals, consolidation could potentially come from SPAC roll-up mergers, Swinoga said. He expects an increase in SPACs in Canada to be “moderate,” as did a majority of participants who voted in an audience poll during the webinar.

This article was originally published by Mergermarket on April 16, 2021; it has been republished with permission. Note some links may require a paid Mergermarket account in order to view. 

  • Challenges and Solutions in the Canadian M&A Market

    Gain insight from our panel of experts in this on-demand webinar replay as they discuss the sector-by-sector impact of ESG trends; the future of SPACs; and the rise of PE fundraising.

  • Your Complete SPAC Space

    SPACs have emerged as a preferred way for many companies to go public. However, a successful outcome requires investors, sponsors, and target companies to be aligned and deal ready. The abbreviated timelines, rounds of regulatory approvals, and careful due diligence can create deal team fatigue. That’s why the right technology can make all the difference.

  • M&A Momentum in the Americas: Webinar Series

    Learn more about the 2021 M&A market trends that are top-of-mind for local experts across the Americas in this four-part webinar series, in partnership with Mergermarket. Access live and on-demand sessions in local language for Brazil, LATAM, Canada and the USA.

Ready to Get Started?

You may also like:

Grow Big or Go Home: M&A Acceleration in the US Tech Industry

The explosive growth of the tech industry has created a wealth of opportunities for mergers and acquisitions. Read the highlights from several technology expert panelists sharing their forecasts for the future in tech on our recent live sector spotlight webinar US Tech Opportunities, presented with Mergermarket.

Male Professional Working at Laptop PC on Rooftop
5 Things You Didn't Know a Data Room Could Do for You

The latest and greatest software features aren’t just for your phone anymore. In the face of longer, more complex deals, the data room industry continues to innovate.

Shanghai China city aerial
7 Datasite Features You're Missing Out On

Look, we know. You’re busy. So let us help you save time. If your VDR is simply a repository for documents, you’re missing out on timesaving and productivity benefits that can add up to hundreds of hours.

Female Professional Looking up at the Sky