Critical Factors Determining the Success of Special Purpose Acquisition Companies (SPACS): Comparative Analysis of an Innovative Asset Class for M&A Market

Abstract

Special Purpose Acquisition Companies, typically known in the marketplace as ‘SPACs’, are publicly listed companies established with the aim of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more operating businesses or assets. Some of the structural features and incentives created by the contractual design of SPACs bear a strong resemblance to that of private equity funds. Although the history of modern SPACs started in the US in early 1990s, the first recorded SPAC IPO was in 2003. Since then, a wave of new generation SPACs occupied a considerable portion of IPOs, not only in the US, but also in Australia, Brazil, Canada, Germany, Italy, Malaysia, Netherlands, New Zealand, South Africa, South Korea, and the United Kingdom. Despite the heavy criticism in the legal and financial literature, the SPAC IPO market began to pick up its pace gradually resulting in a total gross IPO proceed of $40,950 billion in the US between 2003 and as of the date of this Dissertation. SPACs have been recently experiencing a surge in popularity again. The market performance in the year 2017 continues to produce the second largest gross IPO proceeds ($6,270 billion) since 2003. As part of the need for understanding this trajectory, my research focuses on what the determinants of SPACs’ success are, what sorts of factors have propelled them to victory, which ones are associated with failure and based on these findings, if it is possible to suggest a list of metrics to describe what a model of successful SPAC would look like. My second research question tries to discover whether there are any improvement areas for Turkish SPACs in order for them to be more successful and accordingly more attractive for investment, driving primarily from the lessons learnt from the US experience.