The Value behind SPACs

An interview with Michael J. Blankenship

San Francisco, 15th of March 2021

By Jorge Boero – Director of Business Operations

For more than 160 years, Winston & Strawn LLP has served as a trusted adviser and advocate for clients across virtually every industry. In that time, through careful growth and thoughtful fiscal management, we have built a law practice with tremendous breadth and a global reach.

What is the story behind WINSTON AND STRAWN LLP and SPACS?
Winston & Strawn LLP is a leader in special purpose acquisition company (SPAC) transactions. Our team regularly represents SPAC sponsors and underwriters in structuring SPACs and completing their IPOs; SPACs and target companies in SPAC business combination transactions; and investors considering investments in SPACs. Our attorneys have a deep understanding of not only the legal issues impacting SPACs, but also the business, marketing, and industry issues that affect the success of SPACs.

Since 2016, members WINSTON AND STRAWN LLP have worked on more than 40 SPAC IPOs raising aggregate gross proceeds of $14+ billion and 20 business combinations with an aggregate enterprise value of $26+ billion.

WHO IS Michael J. Blankenship?
Michael is a partner of WINSTON AND STRAWN LLP for the Houston office, focusing his practice on corporate finance, M&A, private equity and securities law. He regularly counsels public companies on strategic transactions, capital markets offerings, and general corporate and securities law matters. Mike represents both issuers and underwriters in U.S. and international capital markets transactions, including initial public offerings, and advises on corporate governance and securities market regulation.

Unspac: We know that SPACs exist for already quite some time, why do you think they gain so much importance now?
Michael: A few factors have resulted in SPACs being a viable option for companies to go public and have driven the market to become white hot. The first is that there are now name brand sponsors forming SPACs, which has provided credibility to the product. We have also seen more famous names such as DraftKings execute a de-SPAC transaction with a lot of success. This has helped the idea that a SPAC can take a target public. Much of the recent de-SPACs in the pre-revenue companies also provide lighter fluid to their growth by provide a big pool of capital without giving up significant ownership like a PE transaction would do so.

Unspac: Would you advise a SPAC over a common IPO process? and if yes, why?
MIchael: I would if the valuations were there for them. There are many reasons companies that are established would go the SPAC route, one being the certainty of cash without the loss due to a pop in their stock as a result of an IPO. The transaction can be completed faster than the traditional IPO route.

Unspac: If I am a common citizen, and I wish to buy for the first time SPAC`s founder shares, what would you advise?
Michael: Search for teams that are potentially doing a SPAC and see if you can get in at the at-risk capital level. This is usually reserved for bigger names but there may be an opportunity if you know of teams doing a SPAC.

Unspac: Can risks be calculated on a particular SPAC as you would normally do with a common company going public?.
Michael: Once a deal is announced there are financial projections that provide guidance on the company. Unlike a traditional IPO, business combinations with a SPAC can market with future projections.

Unspac: How do SPACs target companies to acquire?
Michael: SPACs will typically have a general investment thesis, which will be based on the management’s and board’s experience. They will typically have in mind the type of target in mind and will usually have several in mind for the investor roadshow during the IPO process. Once they close the IPO, they may approach the targets with interest or they may receive in-bound targets. The SPAC will usually look to acquire a company with an enterprise value greater than 3 to 5 times the amount in trust. They are looking for companies with good stories that the public shareholders would vote to approve the deal.

Unspac: What do you think should be SPACs key negotiation issues when discussing with a target company.
Michael:They have a number of levers they can pull and some of those are waiving anti-dilution provisions, forfeiting founder shares, earnouts, minimum cash amounts and bringing a PIPE to the deal.

Unspac: How to become a target company visible to SPACS?
Michael: They should look to become public ready and may want to engage a sell side advisor to help them with their story. Have a story that shows growth 4-5 years out and how they plan to get to those milestones.

Unspac: In your experience what are the challenges that people face when dealing with SPACs.
Michael: Making sure they understand the process and timing. They should also make sure they have great legal help to guide them along the way because it is a process that will take them away from their day-to-day business.

Unspac: What future do you foresee for SPACs.
Michael: I think SPACs are here to stay and an alternative to the PE model. We already have many PE, VC and other firms forming SPACs. This lends credibility to the SPAC market. We may see 500 SPACs this year alone, which will certainly give an advantage to targets. I also see SPACs growing in popularity outside the United States.

If you wish more information on SPAC deals, mergers or acquisitions or you wish to become a target company for SPACs you may contact me at is ready to create a community of SPAC solutions for both sides as the ultimate commerce facilitator.