Mar 15, 2021 - Economy & Business

SPACs are looking for smaller companies

Illustration of four different colored checks on four different colored backgrounds
Illustration: Sarah Grillo/Axios

The universe of companies able to be purchased by SPACs is increasing, as rollups become more prevalent.

Between the lines: SPACs typically focus on a single target company, like DraftKings or Virgin Galactic. Several new SPACs, however, are looking to merge two or more private companies, and then take public an entity with larger scale.

Driving the news: A SPAC called Greenrose today announced it will buy and merge four private cannabis companies for upwards of $320 million.

  • Powered Brands, a SPAC that recently raised $240 million in its IPO, aims to form a conglomerate of consumer beauty brands.
  • Group Nine SPAC raised $200 million to buy its namesake media company, but not before it first identifies another media company to buy simultaneously.
  • Altimar Acquisition agreed to buy a pair of private investment firms, Dyal Capital Partners and Owl Rock, in a $12.5 billion deal that's sparked legal fights.

The bull case is that SPAC rollups could enable smaller companies to go public.

The bear case is that some of these smaller companies might not yet have installed the sorts of financial reporting and controls that are expected of a publicly-traded company.

The bottom line: It's getting easier to get carried over the SPAC threshold.

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