Revelations of J.W. Childs Associates LP filing for a $200 million special purpose acquisition company, or SPAC, has commentators dredging up the painful reminder -- at least for the firm -- of its failed attempt to raise a traditional $2.5 billion buyout fund in 2006. The failed fund subsequently led to an exodus of three principals, who formed West Hill Partners LP. In spite of the tough credit environment, top-tier firms haven't had much trouble raising new funds, but things have been tougher for those that can't point to a few blockbuster cash outs during "private equity's Golden Age."
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However, should things continue to get rougher for private equity firms, the
momentum toward SPACs, which is already considerable, may increase. Jon Ogg on
Blogging Buyouts writes:
But this strategy makes life easier for the private equity firm. For starters, they don't have to go run through all the hoops associated with raising a private equity fund. They don't have to use their own sales or biz-dev team to go spend the 90 to 180 days or longer due diligence period. This allows them to make the brokerage underwriting firm go do the leg work and allows them to distribute units that are publicly traded to retail and/or institutional clients. It also gives the private equity firm a two-year time frame as breathing room to go pick their deals.
The lure of SPACs has attracted some experienced buyout veterans. One of the higher-profile buyout vets to launch a SPAC is Tom Hicks. Additionally, SPACs have attracted management veterans. For example, Paul M. Montrone and Paul M. Meister, two veterans of medical device maker Fisher Scientific, have launched Liberty Lane Partners LLC and filed Tuesday to raise a $350 million blank-check IPO that Goldman, Sachs & Co. will underwrite, marking the bank's first SPAC offering. Not only are dealmakers and banks looking to cash in on the SPAC craze, so are the exchanges, which are changing listing requirements to attract SPACs.
And with the SPAC Marathon Acquisition Corp. agreeing to a deal for London's Global Ship Lease Inc. that values the target at $1 billion, one has to admit that the blank-check companies can go after big game.
With SPACs becoming a popular exit route for private equity firms, it won't be surprising to see more buyout pros that receive a lackluster response from limited partners trying their hands with SPACs. - George White
See J.W. Childs filing
See Boston.com story on J.W. Childs SPAC
See Blogging Buyouts post
See Deal.com story on Global Ship lease
See MarketWatch story on Goldman IPO
See Dealwatch on SPACs
