Tailwind Financial and Asset Alliance Corporation Announce Termination of Merger Agreement, Financial Services-Focused SPACs Face Trouble

On August 6, 2008, Tailwind Financial Inc, a $100 million SPAC priced in April 2007, provided notice to Asset Alliance Corporation of its decision to terminate their merger agreement first announced on January 8, 2008. Tailwind now has until the second week in April 2009 to announce and close on a transaction.

According to Tailwind:

"The decision to terminate was based on Tailwind’s belief that it would not be able to obtain the requisite stockholder approval for the transactions contemplated by the Agreement due to market conditions in the financial services sector."

Other financial services-focused SPACs still looking to announce their transactions, including Alternative Asset Management Acquisition Corp, BPW Acquisition Corp, Inter-Atlantic Financial, Inc, Prospect Acquisition Corp, and Triplecrown Acquisition Corp, should take a close look at the significant challenges to moving any future acquisitions over the goal line.

Bottom line for SPAC acquirors: Target quality firms, use significant leverage, and announce early. These factors should help mitigate investor challenges to approval.

Click here for the press release

Has the SPAC Become a More Viable Exit For Private Equity Portolio Companies?

In an article today, Rick Miller, Terry Childers, Michael K Rafter, Hannah Crockett and Eliot Robinson from Powell Goldstein, LLP argue that:

"Against the backdrop of today's tightening initial public offering and credit markets, private equity firms are finding it increasingly difficult to exit their investments using traditional vehicles. The special purpose acquisition company, or SPAC, presents an intriguing exit opportunity for private equity firms looking to capitalize on the ready capital and flexibility offered by SPACs."

They cite "Flexible Acquisition Terms and Increased Earning Potential, Greater Certainty on Financing, and Pricing and Time Constraints" as good reasons for private equity firms to sell to a SPAC.

Click here for the article

SPACs May Now List on the NASDAQ; AMEX and NYSE Forced to Eat Their Own Damn Lunch

Yes, we know that this information is a little stale (the release came out on July 25th, 2008), but it's big news nevertheless. In the face of opposition from the North American Securities Administrators Association (historically, the structure of blank check companies makes the offerings risky for investors and SPAC securities have been highly promoted at the IPO stage and in aftermarket trading), the SEC said that it would impose additional criteria intended to protect investors and that it would review each SPAC that applies to list and evaluate the reputation of the SPAC’s sponsors and underwriters.

Final criteria are as follows for Nasdaq listing, all other criteria are similar to previous listings:

• 90% of the gross proceeds from the IPO must be deposited in trust
• One or more business combinations within 36 months
• Business combinations must be at least 80% of the trust

Click here for the release

2005-2008 SPAC IPO Investment Banking Underwriting League Tables

We've looked at SPAC law firms and we've looked at SPAC accounting firms. We recently even looked at investment banks and their SPAC backlog. Fee-starved investment banks are looking back with wistful eyes to the days of ought-seven and ought-six, so let's help them remember the good 'ol days, shall we?

SPAC IPO rankings follow for all investment banks that have priced at least two SPAC IPOs per year since 2005. Equal credit has been given to all banks on each deal, so you'll see popular co-manager firms like Ladenburg Thalmann and Maxim Group showing up at the top of the lists in later years. Many SPACs underwritten by larger banks like Citigroup, Banc of America, Deutsche Bank and Merrill Lynch enlisted these SPAC experts to help with deal execution.

Trends are obvious here: Bulge-bracket investment banks only begin to enter the picture in 2006, but by the end of 2007 are capturing greater numbers of larger deals, reinforcing the product's credibility with investors and the markets overall.

DealBook Incorrectly Claims that SPAC Registrations Have Fallen to a Five Year Low

Yesterday's DealBook claimed that:

"...registrations dipped to a five-year low this month with only three listings for April, as the decline in initial public offerings caught up with the investment vehicles."

While it's true that s-1 filings dropped in April and the market is showing signs of slowing in general, in fact, on a monthly basis, there have been eleven months between January 2006 and today where monthly SPAC S-1 filings have dipped to three or fewer. See our analysis below:

SPAC S-1 Filing Activity: 2006 to 2008

You're asking our source again? Click on over to Edgar, folks.

Now, this isn't to say that SPAC filers are presented with signficant challenges vis-a-vis the growing backlog...Let's face it: With over 75 SPACs currently in registration with the SEC and probably another 20 to 25 foreign issuers filed on a confidential basis, the chances of making it through this backlog intact are slim.

Time to get your act together, Sorkin. Update: Looks like DealBook got our note. Click here for the article.

Goldman Sachs Files SPAC, Smugly Claims Moral High Ground

Gee thanks, Lloyd. We all knew the product needed to evolve, but we just couldn't bring ourselves to leap blindly into the unknown. Glad you had the co-jones.

Anyhow, Goldman has finally released the terms of their latest SPAC, filing a $350 million IPO for Liberty Lane Acquisition Corp, helmed by two veteran Private Equity guys, Paul M. Montrone and Paul M. Meister (A.K.A. "The Pauls"), who currently run Liberty Lane Partners LLC

Here's what you, dear SPAC aficionado, need to know:

• First, and gaspingly foremost, Goldman is cutting its fee to 6%. i-bankers everywhere are wringing their hands in distress
• Second, The Pauls are only investing about $3.5 million in the business (1%), but in return will only get a 7.5% promote, far less than the typical management team.

A harbinger of things to come? Further legitimization of the product? You decide.

Here's the SEC Filing

SPAC Rankings Arrive! First Edition: The Top 15 SPAC Law Firms of All Time...(Since 2004)

This ranking ranks the top 15 law firms by the number of times they represented either the founders or the investment bank on a SPAC that has either gone public or is still in registration since 2004. Yeah, there are others who have done fewer, but why would you want to pay someone $600 an hour to learn the product?

We might put together a ranking by year at some later date, but then again, we might not.

No surprises here, with Graubard Miller easily smacking down its competition with 62 deals, but they've been hammering away at this from day one. Now that i-banks are starting to fall left and right, it's no wonder that some of the white shoe firms (given a lack of other revenue opportunities) like Skadden, Davis Polk and others are starting to claw their way up the rankings. This ain't the best work, but it's a fee, and the lawyers don't have to defer their payday like the banks. They get paid up front, and in full.

Bottom line: We think that if you're a founder looking for a law firm in this environment, you'd be best off hiring a firm that knows what the heck they're doing, as opposed to some two-bit regional player or big boy looking for a fee who doesn't.

Here ya go, law kids: Start duking it out. How'd we gather this information? Edgar, people, Edgar.

Don't trust us? Click here to double check our rankings.

Trendwatch: "Time, Time, Time ... It's (More Than Ever) on My Side"

Here's an interesting trend to watch: Every SPAC filed since Red Star Partners filed its $36 million China SPAC earlier this year has been filed with a possible 30-month+ deadline to find a business to buy. What's the deal with that? Why is that 2 years (yeesh) is no longer enough time to get these things done???

Well, some reasons are: hedge funds holding management over the barrel at the vote, acquisitions getting tougher to close, competition with non-vote predicated money, and founders finally realizing that they, well, sadly aren't the deal jockeys that they thought they were.

Here's an example for you to sink you teeth into: Trian Acquisition I Corp

Trendwatch: Consumer SPAC Bubble?

Judging by the volume of consumer SPACs recently in registration and that have gone public over the past few months, you'd think someone knows something that we don't. (obviously...)

There have been 4 consumer SPACs that have gone public since November of last year and there are 12 consumer-focused SPACs in registration.

Implication? This means that in a year or so, there could be almost $4 billion worth of SPACs chasing consumer companies. This should make for some interesting competitive dynamics.

Trendwatch: SPAC Founders To Own Smaller Percentages?

In a scary and disturbing turn of events for SPAC founders looking for an easy 10x return on their investment -- no matter how well/poorly they are able to get their acquisition to perform -- investors are asking that they accept a smaller piece of the pie: as little as 15%, down from the traditional 20%. Could it be? ...The humanity!

Some examples:

GHL Acquisition Corp -- 17.5% Founders' Ownership; IPO: Feb 14, 2008
BPW Acquisition Corp -- 15% Founders' Ownership; IPO: Feb 26, 2008

Considering that SPAC founder can still own 15% of a $100 million+ business for only $2-to-$3 million, this still seems like a criminally good deal for SPAC founders.

What are the implications here? Clearly, investors are looking to squeeze SPAC founders, but the reality is that the lower percentage of the business they own, the easier it's going to be to get a deal done when it comes down to the vote. Lower founder ownership = lower dilution to holders when it's all said and done. Ain't that a peach?

Now, rumors are circulating that venerable investment bank Goldman Sachs is preparing a SPAC where the founders will only own around 10%. Details are sketchy at this point, but we're sure we'll be hearing more from the 55 Broads soon.