Analysis

Bankers beginning to slash fees to complete transactions

, Financial times

SPAC bankers are agreeing to slash their fees on deals if they face large redemptions in a sign of the desperation to complete SPAC transactions in a difficult market. Investors have been redeeming their money from SPAC deals at increasing rates amid heightened regulatory scrutiny, a string of scandals and poorly performing SPAC mergers. 

SPAC bankers, who have enjoyed a fee bonanza from arranging deals, are now cutting their fees depending on the level of investor redemptions. This shows how the huge withdrawals have forced a shift in incentives from simply completing deals to minimising the amount of money being pulled. Banks typically receive a 2 per cent upfront fee and 3.5 per cent deferred fee once the merger is complete. Critics of the SPAC structure have long decried how bankers earn fees based on the proceeds raised from a SPAC’s initial public offering regardless of the final sum left after investor withdrawals.

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