Price is not the dominating factor in a SPAC-off, SEC inquiries aimed at SPAC market anticipated, Why Unit4 found itself a rare find in Europe

Happy Friday, hubsters!

In a SPAC-off, the process in which bankers shop certain portfolio companies exclusively to select SPACs, it’s not about seeking out aged SPACs – those close to the end of their 24-month-timeline – with hopes that they’ll pay the highest price.

“You’re not trying to maximize price in SPAC-off; it’s a capital markets exercise,” said Jefferies Managing Director Michael Dodds at McDermott Will & Emery’s recent Healthcare Private Equity Miami Conference. “You’re trying to optimize the certainty in price so the public company trades well,” he said, speaking to the quality and importance of the PIPE investors that invest in the SPAC.

What matters? Things like whether the SPAC sponsor can bring in blue-chip shareholders to diversify the investor base and the reputation of the sponsor and CEO, panelists said.

In a virtual panel earlier this month, PE investors and experts shared insights and strategies around the process of selling healthcare portfolio companies to SPACs, which have already raised $96.4 billion year-to-date – topping all of 2020, according to SPAC Research.

The growth profile that you sell to PIPE shareholders and the SPAC is something you ultimately have to sustain, Comvest’s Roger Marerro said on the panel. “Those are the projections the public market will be ultimately holding you against, and at a certain point, when actuals deviate enough from that projection line that you sold the market when you went public, that’ll be the day of reckoning.”

SPAC-offs also encompass less diligence and a much more focused buyer pool than a typical M&A process. Read PE Hub’s full report here.

SEC enforcement: On the topic of SPACs, Bloomberg wrote Thursday that officials at major firms are anticipating letters from regulators asking about the potential dangers of underwriting a deluge of deals from so-called blank-check companies. While banks have been pushing SPAC deals out the door for months, one impact of the regulator’s move could be a chilling effect that prompts firms to tap the brakes, Bloomberg said.
The report aligns with comments made on the recent virtual Miami panel. Tom Conaghan, co-head of MWE’s capital markets practice, said that incidents of lawsuits and the presence or increase of SEC enforcement action could be harbingers of a pivot in SPAC momentum.

“As we see more and more SPACs in the market, more and more serial SPACers… navigating conflicts of interest is going to be an interesting thing to watch – and you as see more SEC enforcement and a lot of big ticket litigation that might be a signal of things slowing down,” Conaghan said.

European tech: We’ve also got more on a big tech deal announced earlier this week. That is, Advent’s $2.15 billion sale of Unit4 to TA Associates and Partners Group.

Turns out, with few scale European technology opportunities available for investment, Unit4 emerged as a highly sought-after target when it hit the market a few months back, Karishma Vanjani writes. The deal ultimately translated into roughly 25x EBITDA, sources familiar with the matter told PE Hub.

The Netherlands-based enterprise resource planning business is both sizeable and in an attractive and growing segment, which drove buyer appetite for Unit4. “There are not that many multibillion-euro businesses,” one source said. “ERP software remains a very attractive theme that will continue to resonate with investors.”

Read PE Hub’s full report on the deal.

What do you think about SPAC-offs, SPAC enforcement, or anything else happening in SPAC-land? Hit me up with any thoughts or tips on private equity dealmaking at springle@buyoutsinsider.com.