Will Sports SPACs look overseas for a merger?
According to Pitchbook, the number of SPACs that have merged with non-U.S. companies has risen six quarters running. In Q2 2021, nearly one in five completed SPAC transactions (17 out of 91) was with a foreign business (up from 13% in Q1).
That trend has not taken hold within the sports and entertainment sector, though. Just two SPACs formed within the last year combined with an international company: Sports Entertainment Acquisition Corp merged with Super Group and dMY Technology Group II merged with Genius Sports. But conversations with a trio of SPAC sponsors—including Acies Acquisition Corp. and Acies Acquisition II co-CEO Dan Fetters—indicated that could change over the next 12 months. “People will go further afield from their core knitting as the shot clock winds down,” he said. Remember, SPACs typically have two years to consummate a deal before they need to return the money raised to investors.
But if excess competition for SPAC-able companies (i.e. those mature enough for the public markets) in the U.S. is the reason for the rise in mergers with foreign firms, it is logical to wonder why there haven’t been more completed business combinations within the sports and entertainment sector. It is not as if the category is any less competitive. The relatively small data set makes it hard to say (remember, we are only talking about 29 SPAC mergers with foreign companies in all of H1). However, generally speaking, private investment in sports has historically been less prevalent internationally (meaning the pool of SPAC-able companies may be smaller).
It is likely some fundamentally strong, sports-centric, foreign companies have been passed over by—or chose not to dance with—U.S. SPACs, because their businesses lack the rationale (think: customers, domicile revenue, operations) to be listed in the States and attract the institutional backing needed to achieve long-term success.
Deals for international companies can also bring about some additional challenges. A SPAC can find a high-flying company overseas, but if U.S. investors are unfamiliar with the company, it’s not going to thrive on a U.S. exchange—particularly if the company is being combined with a SPAC backed by lesser-known sponsors. For what it’s worth, a lack of name brand recognition can be overcome with an investment in marketing.Read more