Private equity took on a larger role in the market for special purpose acquisition companies even as the number of so-called blank-check companies contracted sharply in the wake of the 2021 SPAC boom.

More than 18% of SPACs that held an initial public offering in 2022 were backed by private equity, up 7 percentage points from 2021 and 14 percentage points from 2020, according to an S&P Global Market Intelligence analysis that tracked SPACs with at least 5% ownership by a private equity or venture capital firm. In the first five months of 2023, as some SPAC activity shifted to Asia from North America, nearly 17% of all SPAC IPOs globally were private equity-backed SPACs.

Shell companies taken public with the goal of acquiring or merging with an existing business, SPACs hit a recent peak in 2021 as public markets approached all-time highs but fell off sharply in 2022. The SPAC bubble deflated when public indexes plunged in 2022 and large numbers of SPAC investors headed for the exits, said Kelly DePonte, managing director of global placement advisory Probitas Partners.

"Everything that was going on in the marketplace [in 2021] was up and to the right, and these were high-octane sorts of deals. As the market began to be more difficult, it became more difficult to execute on that transaction," DePonte said.

Sizzle to fizzle

A total of 771 blank-check companies held IPOs globally in 2021, a 151% increase over the previous year's tally, according to Market Intelligence data. Of the 25 largest private equity-backed SPACs worldwide, all but three held IPOs in 2021.

SPAC IPOs in 2022 fell 71% year over year to 223. With 42 SPAC IPOs through May 31, 2023, including seven with private equity backing, blank-check company debuts on public exchanges are on track for another decline in 2023.

"A lot of these SPACs that happened, say, in 2020–21 at significantly high prices began to crater in the market because they actually weren't very good companies, necessarily. People were buying the sizzle but then finding out, well, there's no steak underneath," DePonte said.

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Liquidations

SPACs typically have up to two years to complete a merger or acquisition or face liquidation.

Private equity firm TPG Inc. held IPOs for four separate SPACs in 2020 and 2021, but two of those four liquidated before closing an M&A deal. At a June 2022 conference, TPG CEO Jon Winkelried described SPACs as "dead."

Others disagree. Ares Acquisition Corp. II raised $500 million in its April IPO, the largest SPAC IPO in more than a year. Ares Management Corp. CEO Michael Arougheti described the IPO as a "strong validation" of the firm's approach to SPACs.

Seventy-seven SPACs launched with private equity backing in the past two years have yet to announce an M&A deal. Of those, 62 remain active. Another 15, or more than 19% of the total, have passed their deadline and appear headed for liquidation, Market Intelligence data shows.

Shift to Asia

The 2021 SPAC boom centered on North America, which hosted 83% of the IPOs. Less than 7% of the blank-check company IPOs that year took place on major Asia-Pacific exchanges, which did not allow for SPACs at the start of the boom but have since developed regulatory frameworks for the vehicles.

SPAC IPOs in the Asia-Pacific region increased nearly 10% to 57 in 2022. They are tracking for a 40% decline this year, based on data through May 31, but SPAC IPOs in North America appear set to drop further — 54% year over year.