Guillermo Cruz
Managing Partner
Maquia Capital Financial Group
/
Expert Contributor

Latam Companies and Their Potential as SPAC Targets

By Guillermo Cruz | Tue, 03/01/2022 - 13:00

Special Purpose Acquisition Companies (SPACs) have represented an attractive growth model for emerging companies and startups over the last few years. Through acquisitions and mergers with blank-check companies, there is more support for business clusters to grow and develop by going public without the need to go through the bureaucracy of an Initial Public Offering (IPO).

SPACs have been around since the 1990s but, in recent years, they have gained impressive traction. In 2020, there were 248 SPAC IPOs, raising a total of US$83 billion, or 46 percent of the proceeds raised by traditional US IPOs. Since Jan. 1 to date, 17 new blank-check companies have filed for IPOs in addition to the 27 SPACs this year that are already searching for a target.

These are created for the purpose of acquiring or merging with other companies to consolidate several players in a sector or industry. We have seen players across energy and power, healthcare, high-tech, finance, agri-tech and other industries reach all-time highs. Companies such as Lucid Group with a US$2.07 billion IPO, GINKGO Bioworks with a US$1.72 billion IPO, Alight, Inc. with a US$1.03 billion IPO, are examples of the deals impacting the market.

Let’s take a closer look. According to an analysis performed by Refinitiv, “the de-SPAC deal value and volume peaked in Q1 2021, with a record 81 deals worth US$158.96 billion. Quarterly deal value has widely fluctuated since, but volumes have remained relatively consistent at approximately 40 to 50 deals per quarter,” proving that the SPACs are a strong long-term secular trend.

SPACs Seeking Latam Targets

Today, these popular investment vehicles have reached Latin America with at least six SPACs looking for targets:

1) Benessere Acquisition Corp. is a US$115 million SPAC focused on effecting a business combination of a technology-focused middle-market and emerging growth companies in North, Central and South America.

2) Maquia Capital Acquisitions Corp. is a US175 million SPAC listed on NASDAQ and formed to effect a business combination with technology-focused middle-market and emerging growth companies in North, Central and South America.

3) Agrinam Acquisition Corp. is a new blank-check company formed to effect a business combination with a technologically advanced entity in the agribusiness, superfoods, food tech, or value-added sectors in Canada, North, Central and South America.

4) DILA Capital Acquisition is a blank-check company formed by DILA Capital and targeting tech-enabled sectors in Latin America. It raised US$55 million.

5) LIV Capital Acquisition II is a blank-check company led by LIV Capital Group and targeting companies in Mexico. It raised US$100 million.

6) Latam Growth SPAC is a blank-check company targeting high-growth businesses in Latin America. It raised US$130 million.

It is clear that this model is a global trend that is increasingly gaining traction. Through SPACs, a company's path to public markets can be made more efficient. Despite its growing popularity in the US and Europe, the potential of this model is still not being fully exploited in Mexico and Latin American markets.

What Are SPACs Missing in Latam?

This is a model that can enhance and propel the growth of a company in full development. The SPACs model has become a perfect vehicle for companies to reach different stock markets around the world.

However, in Mexico, not one of these vehicles was listed on the Mexican Stock Exchange (BMV) in 2021 and only two companies have been listed under this model since the launch of this financial instrument in the country in 2017.

“In order to take full advantage of this model, entrepreneurs and other players in the ecosystem need to be informed and trust innovative models," adds Jerónimo Peralta, Managing Partner of Maquia Capital, a financial group specializing in alternative assets and investment funds that seeks the securitization of Mexican and Latin American companies. 

There is a lack of traction of SPACs in the Mexican Stock Exchange. However, companies and investment funds like the aforementioned have opted to create this type of vehicle in the US to merge with startups or disruptive projects from Mexico, Central and South America.

These vehicles allow a company to be listed in the public markets in approximately six to eight months, significantly faster than a traditional IPO.

The efficiency of this process allows the company to go public in a shorter time and to streamline its actions to increase its value, continue its growth and access better and constant sources of financing, in addition to the partners providing an exit to their investments.

Photo by:   Guillermo Cruz