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Not that long ago, SPACs (special-purpose acquisition vehicles) were considered a backwater on Wall Street. For the most part, it was the domain of small-time underwriters.
SPACs are also known as "blank check offerings." Basically, with this structure, a shell company raises money via a public offering and then attempts to buy a company.
Well, the legitimacy of SPACs got a big boost this week. Goldman Sachs (NYSE: GS) is the underwriter on a new offering, called Liberty Lane Acquisition Corp. The goal is to raised about $350 million in a SPAC deal.
Interestingly enough, Goldman is putting a unique spin on the structure. For example, the management team will put up only 1% of the initial capital. At the same time, they will take a relatively smaller take of the profits (7.5% versus the normal 20% carry). What's more, Liberty plans to issue units that will consist of one share of the common stock and a half warrant (typically, there is one warrant per unit).
And what types of targets is the firm looking for? It's fairly broad, actually. According to the IPO prospectus: "Our strategies are designed to identify and acquire the right business at an attractive valuation and to enhance financial performance and returns on capital through the application of our management team's long-standing business management processes. We are focused on acquiring, transforming and building successful companies to create long-term stockholder value."
Tom Taulli is the author of various books, including The Complete M&A Handbook
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