It took a while, but both the New York Stock Exchange and the Nasdaq Stock Market finally came around. Each are aiming to tap into the lucrative IPO market for special purpose acquisition companies (SPACs), and have put in requests with the Securities and Exchange Commission to list the vehicles and their close cousin, the blank-check companies.

SPACs are shell entities that raise capital through initial public offerings, using the proceeds to acquire one or more operating companies. The investment vehicles, historically formed by experienced corporate executives, have drawn their share of the limelight over the past couple of years. Only recently, however, have such high-profile names like Bruce Wasserstein, Joseph Perella, Thomas Hicks, Nelson Peltz and Ronald Perelman joined the SPAC parade.

Besides the cachet these marquee names carry in the financial world, SPACs accounted for 25% of IPOs in 2007 and made up more than $10 billion of issuance volume. Nowhere was the new issues action hotter than on the American Stock Exchange where 50 blank check companies went public.

"We have a three-year head start on the competition," says Robert Wotczak, managing director and head of equities at the AMEX. "We've clearly demonstrated the ability to efficiently review and list these SPACs over the last three years."

The AMEX is, without a doubt, the first mover in U.S. exchange SPAC offerings. It was the first to pioneer the public listing of blank check companies in the U.S., and in 2006, the AMEX listed its first blank check company, Community Bankers Acquisition, which was followed a year later with its second listing, Shanghai Century Acquisition.

Despite its strong market position, some SPACs that have executed acquisitions have switched their listings over from the AMEX to the Nasdaq, as its electronic trading platform has more liquidity and the exchange itself, carries a stronger brand name. The Nasdaq lists 3,200 companies and handles trades of around 2 billion shares daily.

Bob McCooey, senior vice president in charge of new listings at the Nasdaq, cites that a number of SPACs, which have previously carried out acquisitions, have since listed on the Nasdaq in the past year. As such, they are classified as operating companies, meaning they can trade on the exchange. The Nasdaq's existing rules don't allow blank check companies without assets to list.

"I think it's more attractive to investors, it offers more liquidity and, some would say, a better brand name," says Thomas Friedmann, a partner at Dechert, commenting on the Nasdaq's appeal.

The Nasdaq's proposed rules stipulate that blank check companies must deposit IPO proceeds into an escrow account, and then complete one or more acquisitions that are approved by shareholders and board members within 36 months, versus the standard 24 month time frame.

This could come as a relief to some dealmakers, as a common criticism against the vehicles is the limited timeframe available to make a deal. Critics often argue that once the clock starts ticking, SPAC managers are incentivized to simply locate a deal, as opposed to finding an acquisition that makes sense.

Opportunity for PE

When SPACs first reemerged on the scene, back in 2005, many people in the deal community rushed to judgment. The investment banks doing the underwriting were often lesser known players, such as ThinkEquity Partners or EarlyBird Securities, while the managers running the SPACs were either smaller industry players or tarnished deal pros. Whenever former PE investors launched a SPAC, the collective assumption was that they didn't have the track record to raise a traditional fund.

However, times have clearly changed. In addition to the exchanges coming around and the bigger names, such as Wasserstein or Hicks, diving in, the larger investment banks are also looking to tap into the market. Citigroup and Deutsche bank, for instance, are among the larger names to take on these assignments.

Meanwhile, private equity executives, hampered by problems in the subprime market, have turned to the formation of SPACs to consummate deals without the burdens of relying on the debt market, according to Wotczak. The growing pool of SPAC-sponsored capital also means that people looking to sell have a collection of potential suitors unfazed by the credit weakness or economic uncertainty. And thanks to the timeframes, SPACs have to find deals regardless of the market conditions.

In early March, for instance, Kirtland Capital Partners capitalized on the SPAC phenomenon, exiting its investment in Essex Crane Rental Corp. through a sale to blank-check company Hyde Park Acquisition Corp. Kirtland originally acquired Essex in 2000, and sold the company for $210 million.

Robert Clauser, the chief financial officer of the Amex-listed SPAC Media and Entertainment Holdings, notes that more deals like this could be forthcoming. He affirms: "We're starting to see more activity where private equity groups are interested in SPACs as an exit."