A SPAC is a Special Purpose Acquisition Company.
SPACs are essentially blank check companies that raise funds with early investors, identify an industry or niche where they would like to make an acquisition, go public through an IPO process and then use that capital to acquire a company.
For early-stage or less established companies desiring an IPO or influx of capital, merging with a post-IPO SPAC offers a simpler and faster way to go public compared to the typical time-consuming IPO process.
SPACs have been around a long time but only recently became popular. In fact, there were more SPAC IPOs in 2020 than the entire preceding decade. According to CNN, in 2020 U.S. SPACs raised over $79B only to see that number shoot up to $117B YTD in 2021.
SPACs and Healthcare
Digital Health companies have been especially active in the SPAC market. Companies such as Amwell, 23 And Me, Pear, Headspace, and more than a dozen others have taken advantage of the SPAC craze for easier access to public markets and a quick infusion of cash. In the diagnostics industry, Sema4 (clinicogenomics), LumiraDX (point-of-care testing), and Prenetics (genetics/COVID) agreed to be acquired by SPACs. For our clients in the dental industry, 3D printing company Desktop Metal (which acquired EnvisionTEC) is the SPAC-backed company making the most noise.
Moving forward, there are dozens of SPACs looking for acquisition opportunities in the healthcare space. There has been a slight slowdown from the frenzied pace of Q1, but all indications are the SPAC movement will continue as recent deals were announced in robotic surgery, physical therapy, and life sciences.
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