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The opening panel at Morgan Joseph & Co.'s Inaugural SPAC conference featured a group of special purpose acquisition company veterans taking a look at the benefits of the asset and the current state of the marketplace.
Richard Heckmann of Heckmann Corp. thinks that the tight credit markets have been something of a boon for SPACs since it has diminished competition from buyout shops. "SPACs aren't competing with private equity anymore," he said. "The marketplace is a lot easier now than it was 12 months ago. ... Now not a day goes by that I don't get a call about a transaction. It's difficult for private equity, and here we sit on piles of cash." Jon Furer of Arcade Acquisition Corp. added that "the positives [for using a SPAC] are that it gives you a public vehicle. Unlike in a private equity fund, you don't have to wait for an exit. People come and go." Noting the slowdown in SPAC issues, Heckmann commented that "it seems to me that the SPAC market should be hotter than it is. Tell me a market you can go into where you can't lose money, the worst that can happen is that you'll get your money back." Martin Franklin of Liberty Acquisition Corp. agreed about the lack of risk, but he feels that "the market hasn't been selective enough. There's no merit to diversity when you're a SPAC investor. But there's no downside risk in a SPAC." When discussing the chief benefits of dealing with SPACs for asset sellers, Franklin said that "having the money in the bank is a big plus in the current environment."
"My advice to a [new] team doing a SPAC is to bring something to the party. It's always about the management, it's always about the team. Money doesn't solve problems, management does," Heckmann continued. But it was not only capital considerations but other "subtleties with a SPAC that make it advantageous to a seller." Among those subtleties was the ability to move quickly. "The worst time to go to the market for money is when you need it," he said. "A SPAC saves an enormous amount of time." - George White Categories Deal Video
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