The surge in SPACs can be attributed to the high quality of sponsors in the scene, says UBS executive

American finance specialists share with Israeli entrepreneurs their insights on the alternative path to Wall Street that has recently gained steam

CTech 16:2702.03.21
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“As the market has developed, a lot of really good companies have realized that a SPAC could be their best path to the public market, the best path to raising permanent capital. It is a quicker process with more certainty and if the operating partner, the company, and the SPAC partner have a good fit, there is a real value-added on both sides. Public investors have caught onto that, and you see SPACs receiving a really good reception from the public market when the transactions are announced,” Paul J. Zepf, Chairman and CEO of Global Partner Acquisition Corp II & Chairman of Purple Innovation Inc. said in a joint interview with Carlos Alvarez, Managing Director, Head of Specialty Finance and Head of Permanent Capital at UBS, at Calcalist’s conference dedicated to the recent surge in special purpose acquisition companies mergers.

 

“The quality of the sponsors that are now raising the SPACs, and Paul is a great example of that, has increased quite dramatically over the recent past. So now as public investors, there is a chance to bet on the sourcing and deal-making skills of sponsors such as Paul and I think that is attracting a lot of investors to the market. I would say as well that for the target companies that are looking to go public through a SPAC merger as opposed to a traditional IPO, the process is a little different and in some cases, it is a better fit for what the company is looking for,” Alvarez said, explaining the recent surge in SPAC deals.

 

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Zepf shared some insights from having already successfully taken mattress startup Purple Innovation Inc. (Nasdaq: PRPL) public in 2018. “Purple Innovation was founder-led, growing very quickly, direct to consumer, digitally native, great intellectual property protection, but a young company. I think this is an example of a partnership between a SPAC that has a lot of really good operating experience, experience in Wall Street, and the public markets partnered with Purple, which at the time of our merger a couple of years ago, had $200 million in revenue and was break-even roughly at EBTIDA, and last year the company had over $600 million in revenue and over $80 million in EBTIDA. That’s the kind of success that investors see and that other potential merger partners see in the public market that attracts other potential companies,” he said. “We just finished raising GPAC II in January with UBS’s help as the underwriter, and are now out looking for a similar kind of story, a similar kind of company that would benefit from what we bring to the table and that the public market would see as a really exciting company.”

 

Zepf and Alvarez went on to discuss the urgency to find the right partner to merge with given SPAC’s limited two-year shelf life, the types of companies that are suitable for such mergers, with an emphasis on the tech sector and their interest in what the Israeli ecosystem has to offer in terms of prospective companies.

 

They also shared their thoughts on the pros and cons of taking the SPAC route as far as the merging companies are concerned and whether they think this time SPACs are here to stay for the long-haul.