It’s a Summer of SPACs in Europe as Speedy Deals Prompt IPOs

(Bloomberg) -- The frenzy of blank-check firms listing on the stock market may have cooled off in the U.S., but it’s hotter than ever in Europe, encouraged by the speed with which some of the acquisition vehicles are finding targets to buy.

Of the 27 European offerings by special-purpose acquisition companies in the past year, more than half have listed since June, according to data compiled by Bloomberg.

While these vehicles usually have two years to find an acquisition target, things have been moving much quicker in Europe this summer. Lakestar SPAC I SE, which listed in Frankfurt in February, agreed last week to buy vacation home platform HomeToGo in a 1.2 billion-euro ($1.4 billion) deal. Italy’s Revo SpA went public in May and this week struck a deal for insurer Elba Assicurazioni SpA.

“A lot of European SPACs have entered the market indicating they’ll move on deals within a year to differentiate themselves,” said Saadi Soudavar, co-head of equity capital markets for Europe, the Middle East and Africa at Deutsche Bank AG.

SPACs raise money for the sole purpose of buying a closely held company, allowing the target to go public without the expense and scrutiny of an initial public offering. If they don’t pull off a deal by a specified date, would-be acquirers have to return the cash they’ve raised to shareholders.

A big concern for investors is whether there are enough attractive targets for the hundreds of blank-check companies that are on the prowl for assets.

The glut of deals in North America has led to fears about a bubble and has even prompted the U.S. market regulator to step in and caution retail investors against celebrity-endorsed cash shells. But what has really curbed the runaway blank-check train in its tracks Stateside is scrutiny over accounting rules.

Unencumbered by such oversight, and encouraged by recent rules changes by stock markets to lure more big-name listings to Europe, the smaller continental market is slowly expanding. While the second quarter was the slowest for U.S. SPAC issuance since the start of last year, for Europe it was the busiest.

SPACs have been overwhelmingly a U.S. phenomenon since a surge in issuance began in 2020, with more than $180 billion raised by about 580 vehicles in the past year, compared with $7.2 billion in Europe.

“After the euphoria of the first quarter, SPACs have slowed down globally,” said Alex Watkins, JPMorgan Chase & Co.’s co-head for equity capital markets in Europe, the Middle East and Africa. However, a recent spate of European SPAC listings have been “well-received,” he said. Three new blank-check firms joined continental exchanges this week.

Still, “not all SPAC offerings will get away; it will be the highest quality deals which attract buyers,” Watkins said. “Investors want to see a good quality sponsor team, differentiated strategies and interesting target industries.”

European blank-check firms face plenty of obstacles: They’re competing for deals with deep-pocketed private equity buyers and even the red-hot IPO market, where valuations for fast-growing firms are more beguiling than ever. And U.S.-listed SPACs, some of them started by wealthy European sponsors, are hunting in the region too.

U.K.-based medical startup Babylon Holdings Ltd., online used-car platform Cazoo Ltd. and electric van maker Arrival Ltd. have all been taken over by American SPACs in the past few months alone. A U.S. vehicle headed by former UBS Group AG boss Sergio Ermotti this week said it would take Italian luxury fashion house Ermenegildo Zegna public in a $3.2 billion deal.

While the recently announced transactions in Europe are encouraging, some will inevitably take longer, said Soudavar. And investors are going to want to see more.

“It’ll definitely be helpful for further issuance if we have more successful deal announcements,” he said.

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