Posted on Dec. 2020 at 11:53Updated Dec 4, 2019 2020 at 14:13
Bankers, businessmen, they swear by these new listed acquisition vehicles, the PSPCs. Xavier Niel has just launched a second with Matthieu Pigasse, the investment bank Perella Weinberg is ready to be bought out via a SPAC by the serial finance entrepreneur Betsy Cohen, and the American activist Bill Ackman has made known this was that it would launch the largest vehicle of its kind ever raised at $ 4 billion. But the big unlisted investors seem to want to turn away from it.
86% of them have not invested in PSPCs and have no intention of doing so in the future, according to the Coller Capital benchmark survey conducted in the fall among a panel of 113 large institutional investors. unlisted, American, Asian and European.
Two years to complete a transaction
Two-thirds of these investors consider it a cyclical and temporary phenomenon. They are even three quarters to make this analysis in North America, a market where however the PSPC explode.
“For these large institutional investors, these vehicles, typically dedicated to a single acquisition, are considered to be more risky than diversified funds. Investment targets are also lacking », Explains Francois Aguerre, partner of Coller Capital.
A very large majority (seven out of ten), they believe that private equity offers a much better risk / return ratio than these new listed vehicles. They are only one in… 25 to consider the performance of PSPC as more attractive.
In addition, there are other potential risks for these institutions, says an investment banker active in this segment.
” You only have two years to complete an acquisition, and failure to find it quickly can lead to overpaying for the transaction. He said. Furthermore “The sponsors of these structures also take the risk of facing a negative vote from the shareholders when validating the targeted acquisition”, he emphasizes.
Real explosion of PSPC
In fact, of the 223 PSPCs initiated since 2015, only 89 have gone through the acquisition process, according to a Renaissance Capital study in July. And their performance has been rather negative: an average loss of 18.8% and a median return of -36.1%, compared to the return of 37.2% of traditional IPOs since 2015.
In some cases also, the SPAC is used as a stopgap for companies which have not managed to find an outlet on the stock market, recalls this banker.
Is this disavowal also linked to the competition exerted by these PSPCs on funds, which are also in search of acquisition? Institutional investors, providers of private equity capital, say they are in any case much more comfortable with take-to-private acquisitions.
They are 77% in the latest Coller Capital panel to anticipate growth in these operations over the next two years, in all regions of the world. This year, 68 delisting were carried out, more than in 2019 (62). But their cumulative value was much less: nearly $ 39 billion compared to over $ 87 billion last year.
“The managers’ investment capacities are reaching new heights and these delisting operations constitute an opportunity to broaden their target range. Especially since in the unlisted, some funds tend to keep their best assets for longer and to extend their holding periods ”, adds Francois Aguerre, which de facto restricts the natural pool of LBO transactions.
For the moment, the unlisted puts this new competition and its strike force into perspective. In 2020, PSPCs experienced a real explosion with nearly $ 70 billion raised, according to Preqin, but this represents only 8% of the capital stock that private equity funds have to invest. “They are in direct competition with LBO funds, but it’s a lot of ado about nothing”, judge the consulting firm.