Deal-needy SPACs have struck a series of pacts to take small healthcare companies public as they race against the clock to avoid the risk of forfeiting the money they raised.
Since early April, at least nine health firms — predominantly medical device makers and drug developers — have agreed to mergers to go public via U.S. special purpose acquisition companies, accounting for roughly 40 percent of the deals announced in that period.
EnGene Inc., a biotech company, and Avertix Medical Inc., maker of a device that can detect heart attacks, are among the most recent SPAC deals in the health space. Both accords were announced less than six weeks before initial deadlines when the blank check firms would need to give investors the option to take their cash back.
With sponsors staring down a wall of liquidation deadlines, some have expanded their search for partners. OceanTech Acquisitions I Corp.’s deal with Regentis Biomaterials Ltd., a regenerative medicine company, is the third merger pact it’s inked after two prior ventures fell apart — the sponsors were initially targeting firms in the leisure marine and yachting industries. Altitude Acquisition Corp.‘s deal with Picard Medical Inc. came after three different deadline extensions and marks a pivot from the travel-related ambitions it set with its December 2020 IPO.
Sponsors want to avoid liquidation after spending millions of dollars in fees to set up the ventures. Those costs reached more than $1.5 billion over the past year.
“As the deadline approaches, the sponsors are saying a deal is better than no deal, even if it’s something where they don’t have an obvious expertise in the industry,” said Jay Ritter, professor of finance at the University of Florida.
Roughly 70 SPAC tie-ups have been announced this year, data from SPAC Research show, but with nearly 250 still looking for an agreement, that pace needs to pick up to avoid a wave of liquidations. The push toward health-exposed companies comes as more than 230 sponsors have opted to shut down rather than try to force a deal through.
“SPACs are going through a period where we’re trying to find an equilibrium,” said Mark Schwartz, Ernst & Young’s Americas FAAS Capital Markets Advisory leader. “At some point we’ll sort of get back closer to where we had been with the SPAC being a tool for the right company in the right situation going public.”
