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Blank-Check Firms, Or SPACs, Poised For $300 Billion M&A Spree 

December 14, 2020 at 08:21PM

It turns out blank-check companies, which were behind billions in mergers and acquisitions in 2020, were just getting warmed up.

We could see as many as $300 billion in M&A activity over the next two years based on all the money these special-purpose acquisition companies, or SPACs, have raised, analysts at Goldman Sachs contend.

SPACs are not real companies in the traditional sense, but rather investment vehicles formed to acquire fast-growing and promising privately-held firms and take them public.

And these blank-check firms raised $70 billion in 2020, five times their haul from 2019, Goldman Sachs strategists, led by David Kostin, wrote in a new note to investors, according to Bloomberg.

Overall, there are now more than 205 SPACs on the hunt for companies to buy and take public, with investors behind these blank-check firms increasingly focusing on companies that have the potential to be growth stocks, the news service reported.

That increasing emphasis on yield is a shift from a previous focus on “nontraditional and early-stage businesses,” Bloomberg reported, citing the Goldman Sachs report.

“We expect a high level of SPAC activity will continue into 2021,” Kostin, Goldman’s head of chief U.S. equity strategy, said in the note, according to CNBC.  “Increased retail trading activity has also boosted interest in early-stage SPAC targets. SPACs have low opportunity cost for investors when policy rates are near zero.”

Meanwhile, the pace of mergers and acquisitions by blank-check firms continues to be relentless as 2020 draws to a close.

Online payments firm Paysafe  is one of the latest to announce it will being going public with help from a SPAC, as PYMNTS noted on Dec. 6.

The blank check firm in this case is named Foley Transimene Acquisition Corp II, with Paysafe planning to go public on the New York Stock Exchange with a $9 billion IPO.

The story has a twist as well — this is the second time around for Paysafe, which had been publicly traded before it was taken private by Blackstone Group in 2017.

Paysafe focuses on payment services that enable other firms to take credit cards, debit and cash transactions online.

 

Blank-Check Firms, Or SPACs, Poised For $300 Billion M&A Spree  …

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