Asia’s bankers say SPAC mergers set to take off in the region this year

Photo by Joaquín on Unsplash

Asia’s bankers say they expect the hottest trend in global deal-making, IPOs for special-purpose acquisition vehicles (SPAC), to rocket in the region this year from small beginnings, fuelled by well-resourced investors including private equity firms.

Globally, SPACs raised $92 billion from IPOs in first-quarter 2021, according to Refinitiv data, already surpassing all of 2020. SPAC mergers – when the blank check firm uses IPO funds to merge with a target – amounted to $210 billion.

But Asia’s representation in the global pie has been small so far – about 11 out of 2021’s 304 SPAC IPOs, and just $4.7 billion in SPAC mergers. Given the region’s large pool of new-economy companies, bankers are now plugging it as a hot spot for merger targets.

Raghav Maliah, co-head of M&A for Asia ex-Japan at Goldman Sachs, said the significant increase of Asia-focused SPAC involvement has been the most notable feature in the region’s M&A this year. First-quarter Asia M&A hit a three-year high of $279.5 billion, up 37% year-on-year, Refinitiv data showed, with private equity-backed deals scoring a record $40.6 billion.

“These blank check companies (SPACs) have become a new dynamic force and potential merger partner for some of Asia’s most innovative companies,” Maliah said.

For example, India’s largest renewable energy firm ReNew Power, in which Goldman invested, in February agreed to go public through a merger with a SPAC.

Meanwhile, Chinese ride-hailing giant Didi Chuxing and its Indonesian counterpart Grab have held discussions about the SPAC merger option to go public, Reuters has reported.

Samson Lo, head of Asia M&A at UBS, said SPAC-related activities will last for the large part of the year. Still, he cautioned, a mismatch could yet develop in the supply of SPAC merger candidates and demand from the abundance of SPACs that just “keep coming”.

Banks not only generate fees from the SPAC merger transactions, but also from potential ‘PIPE’ (private investment in public entity) deals – when a SPAC raises additional capital to complete a targeted merger.

On the funding side, private equity deployable capital focusing on Asia stood at $376.4 billion in March – the highest ever, according to data provider Preqin.

“There are lots of buyers, including SPAC, private equity and strategic (investors), which makes it an attractive time to sell assets,” said Mayooran Elalingam, Deutsche Bank’s head of investment banking coverage & advisory in Asia Pacific.

“We are seeing positive momentum in the market.”

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.