Increased SPAC Activity and Economic Recovery Post-Pandemic Drive Global Deals North of USD 290 Billion for First Half of 2021
Thanks to continued demand for special purpose acquisition company (SPAC) deals, high liquidity and investor enthusiasm, capital raising globally has surged to new highs in the first half of 2021, with the bulk of companies preferring to list their initial public offerings (IPOs) locally, finds a new analysis from the global law firm Baker McKenzie. A total of 1,263 deals valued at USD 294 billion are expected to be completed by 30 June 2021, with domestic IPOs accounting for 77% of all listings during this time.
The new Baker McKenzie analysis, H1 IPO Snapshot: Unfolding Trends for 2021, notes that this year’s capital raising has reached a new high watermark, a 220% spike compared to the first half of 2020. It is the first time that over USD 200 billion was raised during the first half of any year, and deal volume also saw a strong 143% increase in H1 2021.
US- and China-based issuers led the pack in the first half of 2021, with 424 listings and 211 listings respectively, followed by Canada (63), Australia (60), and Japan (53).
Cross-border activity also grew, with deal volume increasing by 91% year-over-year and value increasing by 232% during the same time. The strong recovery of Mainland China’s economy provided a boost in cross-border listings to Hong Kong and the US.
“The first half of year was dominated by unprecedented SPAC activity, a trend that is continuing to make its way through markets around the world,” said Helen Bradley, Baker McKenzie’s London-based Global Chair of Capital Markets. “And though the appetite for SPACs may have begun to wane in the US, all signs indicate that SPACs are here to stay and are likely to be allowed in other jurisdictions as well.”
The Nasdaq and the NYSE were the top exchange destinations in H1 2021, raising over USD 160 billion across 519 IPOs. Over 80% of IPO issuers were US-based.
Continued growth in Mainland China domestic listings bolstered the performance of the Shenzhen and Shanghai exchanges. Other strong performers included the ASX, TSX (mainboard, TSXV and NEX Board), Japan Exchange Group, KRX and HKEx (mainboard and GEM).
Euronext Amsterdam was boosted by two cross-border megadeals, worth over USD 1 billion each, bringing capital raising for Euronext to over USD 4 billion for the first time since 2018.
The financial sector led in terms of value (USD 124 billion raised) and volume (455 deals), most notably due to the number of SPAC IPOs, with over 350 SPACs going public to raise USD 103 billion. Technology and Healthcare came in second and third in the rankings for both value and volume, as the COVID-19 pandemic helped to drive investments into these sectors, particularly in China.
In addition to the rise in SPACs in the US, other regions may also be moving to attract SPAC activity. In London, Lord Hill’s review of the UK’s listing regime was published in an effort to help the LSE gain a more competitive edge against other exchanges post-Brexit. One recommendation is to remove the automatic suspension of SPACs. Euronext, Hong Kong and Singapore are also exploring SPACs due to investor demand.
In the US, headwinds are building for SPACs. The US capital markets landscape is expected to shift in the coming months, due to the new US administration and SEC chair. Various regulatory and disclosure changes are considered likely, including an increased focus on ESG reporting requirements (including DEI disclosures), closer scrutiny of SPACs and more enforcement proceedings by the SEC.
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