Goldman Sachs just closed its second billion dollar blank check deal as the Wall Street firm seeks to transform the troubled SPAC market by building a sustainable franchise that aligns investor interests with insiders.
Nuclear measurement and analysis company Mirion Technologies began operations Thursday after merging with GS Acquisition Holdings Corp. II, which values the combined company at approximately $ 2.6 billion including debt, trading on the New York Stock Exchange.
Unlike most SPACs on the market, where sponsors are entitled to 20% of the total outstanding shares for free or at a large discount after the IPO, Goldman’s Mirion deal postpones this so-called sponsor advertising entirely and sponsors are only paid when the stock changes more than 20% increases.
“Earning the promotion upfront always tends to put a little more emphasis on price and a little more on forecasting because you are motivated to close the deal,” said Tom Knott, head of SPAC’s emerging business Goldman. This division falls under the wealth management division of Wall Street Bank.
Special acquisition companies raise money in the public markets, sometimes without having an idea of which companies will eventually take them public within two years. They have come under scrutiny because of disproportionate insider advantages and lucrative incentives, often to the detriment of small investors.
Elizabeth Warren and other Democratic Senators recently sent open letters to some senior SPAC leaders asking about how they are being compensated. SEC Chairman Gary Gensler has repeatedly warned of false interests between sponsors and shareholders, stating that greater disclosure is required.
Goldman seeks to bridge the gap between the returns insiders get versus average shareholders. The bank also invested $ 200 million in the Mirion deal, making it the largest private public equity investment, or PIPE investor.
“At the company, we try to franchise this way. To do that, we want strong relative performance over time,” said Knott. “Sponsors who structure their transaction responsibly and bring really good deals to market will always play a role.”
After a blockbuster in 2020 and the first quarter of 2021, according to Barclays Research, a record amount of SPAC capital – more than $ 135 billion – is now looking for target companies to go public.
Goldman Asset Management’s first deal was Vertiv Holdings in late 2019, which valued the data center equipment company at more than $ 5 billion. Shares have more than doubled since then.
Goldman has registered other SPACs with the SEC, including GS Acquisition Holdings Corp. VIII and IX.
“I sit down with 1,000 companies on every deal we buy, and I tell each of them that the statistical probability that we will get a deal with pretty small is pretty slim, but our hope is at least the next SPAC Coming through your door I hope the first thing you ask is why you are not willing to put off your promotion entirely because it is Goldman Sachs, “Knott said.
“We’re really focused on changing the market,” he added.