2020 De-SPAC Debrief

We’re pleased to announce Freshfields’ 2020 De-SPAC Debrief: A comprehensive review of all de-SPAC transactions that closed in 2020. 2020 was the year of the SPAC, with more than 240 SPAC IPOs, more than 60 de-SPAC business combinations, the largest SPAC IPO in history and the biggest SPAC M&A deal ever.

With an eye to the future, we reviewed all 64 SPAC business combinations that closed in 2020, and have compiled a statistical summary of these deals. The data from these 64 closed deals reflects and confirms trends in the de-SPAC arena which we expect to continue into 2021. We’ve summarized some of the report’s key takeaways below. The entirety of the report—including all 48 terms we analyzed—can be found here.

Some SPAC sponsors are under pressure to give up a portion of their equity in order to sign and close deals

• 59% of the deals imposed vesting and/or forfeiture requirements with respect to all or a portion of the SPAC sponsor’s equity
• For deals requiring forfeiture of sponsor equity, 47% required forfeiture of both stock and warrants, 40% for stock only, and 13% for warrants only

Target companies are able in some cases to negotiate superior terms in SPAC-offs

• Only 28% of the deals had a post-closing purchase price adjustment procedure
• Merger consideration was held in escrow in only 28% of the deals
• The most typical target shareholder lockup was 6 months, and the most typical SPAC sponsor lockup was 12 months
• Only 30% of the deals had seller indemnification provisions, and only 30% of the deals had a termination fee

Deals are getting done very quickly

• The median amount of time between signing and the initial filing with the SEC was 21 days (just 3 weeks), with 8 deals filing within 5 days of signing
• The median amount of time between signing and closing was 3.5 months, with the quickest deal closing only 51 days after signing
• A majority of deals were signed even though the target did not provide PCAOB-compliant financial statements to the SPAC at the time of signing

PIPE and other equity financing for de-SPAC deals is ubiquitous 

• 69% of the deals were supported by a PIPE
• Only 12% of the deals did not have a PIPE, forward purchase, non-redemption agreement or other form of equity financing
• The average PIPE size for the 64 closed deals was $288 million (the median was $160 million)

Everyone interested in SPACs—bankers, investors, company executives, private equity officers, 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 2021!

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