In a recent webinar hosted by Real Deals in Partnership with IQ EQ, industry experts discussed the boom in interest in SPACs in Europe, especially in Luxembourg and the Netherlands and how they are being used by PE.

Speakers:

Annefleur van Oel, NautaDutilh

Arnaud Delestienne, Luxembourg Stock Exchange

Pascal Rapallino, IQ-EQ

Emma Causevic, IQ-EQ

The boom

“In 2020, SPAC IPOs in the US raised more funds than all previous years combined. The value of funds raised exceeded more than $100bn in US deals. The US SPAC boom can be explained by the large amount of dry powder available and the listing rules that have made the jurisdiction more appealing for listings. However, this boom is slowing down due to the SEC’s cautionary statement on SPACs, financial reporting and audit considerations. So, we will now see the SPAC boom move from the US to Europe, especially to Luxembourg and the Netherlands.” Pascal Rapallino

“There has been a major boom in the last year in SPACs in Europe. For example, previously we only had one SPAC listed on the Euronext Amsterdam, and over the past year, there have been over 20 SPACs that have listed on the exchange.” Annefleur van Oel

“Firms like to choose the Netherlands to list their SPACs because the country is a very stable, reputable jurisdiction with a flexible legislative system. We are increasingly seeing that European bankers are considering Amsterdam as a launch pad for their SPACs as it is a relatively straightforward place to list. Throughout 2020, we saw a slight increase, but now it is booming in the Netherlands." Emma Causevic

“When it comes to Luxembourg, there has been a fair number of transactions originating in the country. The legal and the corporate framework is quite attractive for these transactions and the CSSF, is also quite reactive." Arnaud Delestienne

Sponsor advantages

“PE firms are always eager to identify new ways to raise and deploy capital and SPACs represent a great way to access investment opportunities. SPACs are attractive to PE firms because they provide a faster and more efficient IPO process; it can have lower transaction costs and greater access to capital and gives greater control over the transaction." Emma Causevic

“From a sponsors’ perspective, the SPAC structure offers a lot of upside. Usually, they can acquire a 20 per cent stake in a SPAC that will eventually be a 20 per cent stake in a listed company. And, they buy shares at a nominal value, so they have a low risk. For investors, they get to vote on decisions and their risk is also quite low." Annefleur van Oel

SPACs vs IPOs

“Our understanding is that SPACs come with a number of advantages. These include time to market, overall costs, complexities, etc. Due to the nature of the SPAC vehicle, some also mention an advantage in terms of pricing, which IPOs can be more uncertain on." Arnaud Delestienne

“In an IPO, there is a timeline set out with the target company, but with a SPAC, it is bound to a two year time frame and if they do not complete the business combination in this period, then the sponsors lose the money that they have invested in the SPAC. So, there is more pressure and incentive to close a deal." Annefleur van Oel

Rules and regulations

“We did a comparison between listing frameworks in the US and several European countries and what we concluded is that there is certainly a convergence on the principles and rules around SPACs, but differences in terms of what thresholds are being applied. Each SPAC is fundamentally different. This is not just in the launch process, but also each de-SPAC process will be a bespoke case, therefore, we thought that the guidelines should remain light and generic. The guidelines were also designed with the aim of enhancing the Luxembourg capital markets offering; to provide an ecosystem that supports SPACs end-to-end." Arnaud Delestienne

“In the Netherlands, Dutch law provides great flexibility and what we have seen via the recent listings is that that law allows us to closely mirror the US SPAC model." Emma Causevic

“Within Europe, there is a very well-defined framework for the stock exchanges to operate in and so it’s not like there’s a lack of guidance. However, what we may be lacking here is specific guidance on the nature and features of a SPAC. But, overall, there is a well-defined framework for capital markets participants to structure a transaction and get them approved." Arnaud Delestienne

Just a bubble?

“It will be interesting to see which SPACs will succeed in finding a business combination in the next two years. If these are successful, I expect many more SPACs will come." Annefleur van Oel

“The European markets are still less saturated than the US markets, so there is still room for growth in the immediate future. From our perspective, SPACs are also contributing to diversifying access to capital markets, so, in itself, SPACs are a good development. Of course, there are risks that come with the structure, but if guidelines are provided in the right way, there should be bright days ahead for SPACs." Arnaud Delestienne

“London could be one of the preferred locations for SPACs in the coming years. The UK’s FCA initiated research on SPACs recently to understand how they can better enable SPAC activity in UK markets." Pascal Rapallino

Listen to the full discussion here